Failure to adjust for expired prepaid insurance at year end will result in an
A)overstatement of liabilities.
B)understatement of assets.
C)understatement of owner's equity.
D)overstatement of net income.

Question

Quizplus · Accepted Answer

Failure to adjust for expired prepaid insurance at year end will result in an overstatement of net income. This is because the amount paid for the insurance will be included as an expense, even though a portion of the insurance has already been used up or expired. Adjusting for the expired prepaid insurance will reduce the expenses and result in a more accurate net income figure.

Failure to Adjust for Expired Prepaid Insurance at Year End