If an adjusting entry is not made for an accrued expense
A) expenses will be overstated.
B) liabilities will be understated.
C) net income will be understated.
D) owner's equity will be understated.

Question

Quizplus · Accepted Answer

Failing to record an adjusting entry for an accrued expense means that the expense is not recognized in the period it was incurred. This leads to an understatement of liabilities (because the owed expense is not recorded) and an overstatement of net income and owner's equity, since expenses reduce net income and, consequently, owner's equity.

If an Adjusting Entry Is Not Made for an Accrued