Failure to adjust for an unrecorded expense such as interest expense will understate liabilities.

Question

Quizplus · Accepted Answer

Failure to adjust for unrecorded expenses such as interest expense will lead to an understatement of liabilities on the financial statements. This is because interest expense is a contractual obligation that the company owes to its creditors, and failing to record it as a liability will misrepresent the company's financial position.

Failure to Adjust for an Unrecorded Expense Such as Interest