The adjustment for accrued wages included the entire pay period, some of which occurs next month. This would
A) understate the liabilities.
B) overstate the liabilities.
C) overstate net income.
D) None of these are correct.

Question

Quizplus · Accepted Answer

The adjustment for accrued wages includes wages that have been earned by employees during the current period but not yet paid or recorded. Including the entire pay period, some of which occurs next month, would overstate the liabilities because the company is not yet responsible for paying those wages. As a result, the adjustment would increase the liability balance on the balance sheet, making it appear as if the company owes more than it actually does. This would also result in an overstatement of expenses and understatement of net income on the income statement.

The Adjustment for Accrued Wages Included the Entire Pay Period