If an adjustment for depreciation is omitted from the financial reports, the effect is which of the following?
A) Assets are understated; profit is understated
B) Assets are overstated; profit is overstated
C) Assets are understated; profit is overstated
D) Assets are overstated; profit is understated

Question

Quizplus · Accepted Answer

Depreciation expense reduces the value of assets and reduces profit. If it's omitted, assets will not be reduced as they should be, leading to an overstatement, and profit will not be reduced by the depreciation expense, also leading to an overstatement.

If an Adjustment for Depreciation Is Omitted from the Financial