Identify the effect (a through h) that omitting each of the following items would have on the balance sheet.
-Wages are paid every Friday for the five-day workweek. The month ended on Monday and no adjustment was recorded.
A)Assets and owner's equity overstated
B)Assets and owner's equity understated
C)Assets overstated and owner's equity understated
D)Assets understated and owner's equity overstated
E)Liabilities and owner's equity overstated
F)Liabilities and owner's equity understated
G)Liabilities overstated and owner's equity understated
H)Liabilities understated and owner's equity overstated

Question

Quizplus · Accepted Answer

The omission of recording wages payable for the last day of the month results in liabilities being understated because the company owes wages for that day. Consequently, owner's equity is overstated because expenses are understated, leading to an overstatement of net income and retained earnings.

Identify the Effect (A Through H) That Omitting Each of the Following