Failure to record a liability will probably:
A)result in overstated total liabilities and shareholders' equity.
B)result in overstated net earnings.
C)have no effect on net earnings.
D)result in overstated total assets.

Question

Quizplus · Accepted Answer

Failing to record a liability means that an expense that should have been recorded will not be, leading to higher net earnings than should be the case. Expenses decrease net earnings, so not recording a liability (and thus the related expense) will result in overstated net earnings.

Failure to Record a Liability Will Probably