How does failure to record accrued revenue distort the financial reports?
A) It understates revenue, net income, and current assets.
B) It understates net income, stockholders' equity, and current liabilities.
C) It overstates revenue, stockholders' equity, and current liabilities.
D) It understates current assets and overstates stockholders' equity.

Question

Quizplus · Accepted Answer

Failure to record accrued revenue results in an understatement of revenue, net income, and current assets. This is because revenue that has been earned but not yet received has not been recorded, which leads to an understatement of revenue and net income. In addition, the corresponding receivable has not been recorded, resulting in an understatement of current assets.

How Does Failure to Record Accrued Revenue Distort the Financial