If a legitimate expense is not accrued at the end of the accounting period,the result will be an
A)understatement in liabilities and an overstatement in profit.
B)overstatement in liabilities and an understatement in profit.
C)overstatement in assets and profit.
D)understatement in assets and profit.

Question

Quizplus · Accepted Answer

Failure to accrue a legitimate expense at the end of the accounting period would result in an understatement of liabilities since the expense should be recognized as a liability. This would, in turn, lead to an overstatement of profit since the expense is not being deducted from revenue.

If a Legitimate Expense Is Not Accrued at the End