A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would:
A) Understate net income by $28,000.
B) Overstate net income by $28,000.
C) Have no effect on net income.
D) Overstate assets by $28,000.
E) Understate assets by $28,000.

Question

Quizplus · Accepted Answer

Accrued wages are an expense that should be recorded to accurately reflect the company's liabilities and expenses. Not recording them understates expenses, thus overstating net income.

A Company Made No Adjusting Entry for Accrued and Unpaid