The inclusion of invalid sales in the client's accounting records leads to an:
A) understatement of assets and overstatement of income.
B) understatement of assets and income.
C) overstatement of assets and income.
D) overstatement of assets and understatement of income.

Question

Quizplus · Accepted Answer

Including invalid sales in the accounting records leads to an overstatement of assets (accounts receivable) and income. This is because the client is recording revenue that they have not actually earned, which inflates their figures.

The Inclusion of Invalid Sales in the Client's Accounting Records