The failure to properly record an adjusting entry to accrue a revenue item will result in an
A) understatement of revenues and an understatement of liabilities.
B) overstatement of revenues and an overstatement of liabilities.
C) overstatement of revenues and an overstatement of assets.
D) understatement of revenues and an understatement of assets.

Question

Quizplus · Accepted Answer

Failure to properly record an adjusting entry to accrue a revenue item will result in an understatement of revenues and an understatement of assets. This is because the revenue has been earned but not yet recognized, meaning it has not been recorded in the accounting records. This will lead to an understatement of both revenues and assets.

The Failure to Properly Record an Adjusting Entry to Accrue