Failure to record the adjusting entry for depreciation results in assets and owner's equity being overstated on the balance sheet.

Question

Quizplus · Accepted Answer

Failure to record the adjusting entry for depreciation means that the asset's book value (historical cost less accumulated depreciation) is not updated to reflect the decrease in value over time, resulting in an overstatement of the asset's value and therefore an overstatement of owner's equity on the balance sheet.

Failure to Record the Adjusting Entry for Depreciation Results in Assets