The accountant of Ovenly Inc. failed to make an adjusting entry to record $6,000 of unearned service revenue that has now been earned. Assume the unearned revenue was initially recorded as a liability. Which of the following statements is true?
A)The total revenue will be overstated.
B)The total revenue will be understated.
C)The total expenses will be overstated.
D)The total expenses will be understated.

Question

Quizplus · Accepted Answer

If the adjusting entry is not made to record the earned revenue, the liability related to unearned revenue is not reduced and the income statement will not include the revenue earned. Therefore, the total revenue will be understated.

The Accountant of Ovenly Inc