A publishing company records the subscriptions paid in advance by its customers in an account called Unearned Subscription Revenue.If the company fails to make the end-of-period adjusting entry to record the portion of the subscriptions that have been earned,one effect will be an:
A)Overstatement of equity.
B)Overstatement of liabilities.
C)Understatement of assets.
D)Understatement of liabilities.
E)Overstatement of assets.

Question

Quizplus · Accepted Answer

Unearned Subscription Revenue is a liability account. If the company does not adjust for the earned portion, liabilities will be overstated because it will still include amounts that should have been recognized as revenue.

A Publishing Company Records the Subscriptions Paid in Advance by Its