What effect will this adjustment have on the accounting records?
A) increase net income
B) increase revenues reported for the period
C) decrease liabilities
D) all of these

Question

What effect will this adjustment have on the accounting records? 
A) increase net income 
B) increase revenues reported for the period 
C) decrease liabilities 
D) all of these

Quizplus · Accepted Answer

The adjust entry will have an impact on both the income statement and the balance sheet. By recording the interest revenue, it will increase revenues reported for the period and ultimately have an effect on net income. Additionally, since the interest receivable was initially not recorded as a liability, the adjustment will increase liabilities on the balance sheet. Therefore, all of the options (A, B and C) are correct.

What Effect Will This Adjustment Have on the Accounting Records