A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31.Which of the following statements is true?
A)It will have no effect on income.
B)It will overstate assets and liabilities by $9,000.
C)It will understate current-year net income by $9,000.
D)It will understate assets by $9,000.
E)It will understate current-year expenses and overstate current-year net income by $9,000.

Question

Quizplus · Accepted Answer

Failing to record accrued and unpaid employee salaries will result in an understatement of expenses (since the salary expense is not recognized) and an overstatement of net income (since expenses are lower than they should be). This does not directly affect the balance of assets or liabilities at the point of the error.

A Company Made No Adjusting Entry for Accrued and Unpaid