At the end of the fiscal year, the usual adjusting entry to Prepaid Insurance to record expired insurance was omitted. Which of the following statements is true?
A) Total assets at the end of the year will be understated.
B) Owner's equity at the end of the year will be understated.
C) Net income for the year will be overstated.
D) Insurance Expense will be overstated.

Question

Quizplus · Accepted Answer

If the adjusting entry to record expired insurance is omitted, expenses will be understated, leading to an overstatement of net income.

At the End of the Fiscal Year, the Usual Adjusting