Failure to prepare an adjusting entry at the end of a period to record an accrued revenue would cause
A) net income to be overstated.
B) an understatement of assets and an understatement of revenues.
C) an understatement of revenues and an understatement of liabilities.
D) an understatement of revenues and an overstatement of liabilities.

Question

Quizplus · Accepted Answer

Failing to record an adjusting entry for accrued revenue results in not recognizing revenue that has been earned but not yet billed, leading to an understatement of both assets (since the receivable is not recorded) and revenues (since the earned revenue is not recognized).

Failure to Prepare an Adjusting Entry at the End of a Period