If an accountant fails to make an adjusting entry at the end of a fiscal period to record expired insurance, the omission will cause
A) total assets to be understated.
B) total expenses to be understated.
C) total revenue to be understated.
D) liabilities to be overstated.
E) liabilities to be understated.

Question

Quizplus · Accepted Answer

If an accountant fails to make an adjusting entry to record expired insurance, the omission will cause total expenses to be understated. This is because the expired insurance is an expense, and if it is not recorded, then the expense will not be reflected accurately in the financial statements. As a result, net income will be overstated, and the statement of retained earnings will be incorrect. Additionally, the balance sheet will not reflect the correct amount of prepaid insurance, which could impact decisions related to future insurance purchases.

If an Accountant Fails to Make an Adjusting Entry at the End