If a company fails to adjust for accrued expenses, what effect will this have on that month's financial statements?
A)Failure to make an adjustment does not affect the financial statements.
B)Expenses will be understated and net income and stockholders' equity will be overstated.
C)Assets will be overstated and net income and stockholders' equity will be understated.
D)Assets will be overstated and net income and stockholders' equity will be overstated.

Question

Quizplus · Accepted Answer

Accrued expenses are expenses that have been incurred but not yet paid or recorded. If a company fails to adjust for these, expenses will be understated, leading to an overstatement of net income and stockholders' equity.

If a Company Fails to Adjust for Accrued Expenses, What