At year-end it was forgotten to accrue a $2,000 expense. This will result in an:
A) understatement of liabilities and an overstatement of profit and equity.
B) understatement of assets, profit, and equity.
C) overstatement of liabilities and an understatement of profit and equity.
D) overstatement of assets, profit, and equity.

Question

Quizplus · Accepted Answer

Failing to accrue a $2,000 expense means the expense is not recorded, leading to liabilities being understated (because the owed amount is not recognized) and profit (and consequently equity) being overstated (because expenses reduce profit).

At Year-End It Was Forgotten to Accrue a $2,000 Expense