The accountant of Reliable Consulting, Inc. failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year. Assume the company initially recorded a liability. Which of the following statements is true?
A) The total liabilities will be overstated.
B) The total liabilities will be understated.
C) The total assets will be overstated.
D) The total assets will be understated.

Question

Quizplus · Accepted Answer

Failing to adjust for earned revenue that was previously recorded as unearned will result in liabilities being overstated because the amount that has been earned is still recorded as a liability rather than being recognized as revenue.

The Accountant of Reliable Consulting, Inc