Which of the following statements is false?
A) Either an overstatement of an asset account or an understatement of a liability account would have the same effect on the income statement.
B) A misclassification in the balance sheet will have no effect on operating income.
C) Either an overstatement of an asset account or an overstatement of a liability account would have the same effect on the income statement.
D) Either an understatement of an asset account or an overstatement of a liability account would have the same effect on the income statement.

Question

Quizplus · Accepted Answer

An overstatement of an asset account or an overstatement of a liability account would not have the same effect on the income statement. Overstating an asset might not directly affect the income statement unless it relates to an expense (e.g., prepaid expenses). Overstating a liability could potentially affect the income statement if it involves recognizing an expense too early or in too high an amount. The effects on the income statement depend on the nature of the accounts involved and their relationship to income and expense recognition.

Which of the Following Statements Is False