If an adjustment for depreciation is not recorded for the year the effect on the financial statements will be:
A) Assets are understated; profit is understated
B) Assets are understated; profit is overstated
C) Assets are overstated; profit is overstated
D) Assets are overstated; profit is understated

Question

Quizplus · Accepted Answer

Depreciation expense reduces the book value of assets and reduces profit. If it's not recorded, assets will not be reduced as they should be, remaining overstated, and profit will not decrease from the expense, thus being overstated.

If an Adjustment for Depreciation Is Not Recorded for the Year