At year-end,it was forgotten to accrue a $2,000 expense.This will result in an:
A) understatement of assets, profit, and equity.
B) understatement of liabilities and an overstatement of profit and equity.
C) overstatement of liabilities and an understatement of profit and equity.
D) overstatement of assets, profit, and equity.

Question

Quizplus · Accepted Answer

Forgetting to accrue an expense means that the company has incurred the expense but has not yet recorded it, resulting in an understatement of liabilities. However, since the expense was not recorded, it will also lead to an overstatement of profit and equity, as these accounts will not reflect the expense that should have been recognized.

At Year-End,it Was Forgotten to Accrue a $2,000 Expense