If the adjustment for accrued salaries at the end of the period is inadvertently omitted, both liabilities and stockholders' equity will be understated for the period.

Question

Quizplus · Accepted Answer

If the adjustment for accrued salaries at the end of the period is inadvertently omitted, liabilities will be understated because the owed salaries have not been recorded as a liability. However, expenses will also be understated, which means net income will be overstated. Since net income contributes to retained earnings, a component of stockholders' equity, stockholders' equity will be overstated, not understated.

If the Adjustment for Accrued Salaries at the End of the Period