The accountant for Sparks Electric failed to make an adjusting entry to record $3,000 of telephone expenses for the last two months of the year.Which of the following statements is true?
A)The total liabilities will be overstated.
B)The total liabilities will be understated.
C)The total assets will be overstated.
D)The total assets will be understated.

Question

Quizplus · Accepted Answer

Failing to record the telephone expenses means that the liabilities (accounts payable or accrued expenses) are understated because the company owes money for those expenses but hasn't recorded the obligation.

The Accountant for Sparks Electric Failed to Make an Adjusting