The accountant of Omega, Inc. failed to make an adjusting entry to record $6,000 of unearned service revenue that has now been earned. Assume the deferred 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

Since the unearned service revenue was not recorded as earned, the total revenue will be understated. The liability will also be overstated since the company should have recognized the revenue at the time it was earned. This error will not affect the total expenses as they are not related to the unearned service revenue account.

The Accountant of Omega, Inc