The cash purchase of a truck was recorded as a purchase on credit. This error would mean
A) assets were overstated.
B) liabilities were overstated.
C) Answers A and B are correct.
D) None of the above are correct.

Question

Quizplus · Accepted Answer

The cash purchase of a truck was recorded as a purchase on credit. This error would mean assets were overstated because the company would have recorded the truck as an asset but would not have recorded the corresponding decrease in cash. Liabilities were overstated because the company would have recorded the purchase as a liability but would not have recorded the corresponding increase in cash.

The Cash Purchase of a Truck Was Recorded as a Purchase