If a company failed to make the end-of-period adjustment to remove from the Unearned Management Fees account the amount of management fees that were earned, this omission would cause:
A) An overstatement of net income.
B) An overstatement of assets.
C) An overstatement of liabilities.
D) An overstatement of equity.
E) An understatement of liabilities.

Question

Quizplus · Accepted Answer

The omission would cause an overstatement of liabilities because the Unearned Management Fees account, a liability, would still include amounts that have already been earned and should have been recognized as revenue.

If a Company Failed to Make the End-Of-Period Adjustment to Remove