If an adjustment for accrued rent is omitted from the financial reports the effect is:
A) liabilities are understated; profit is overstated.
B) liabilities are overstated; profit is understated.
C) assets are understated; profit is overstated.
D) assets are overstated; profit is understated.

Question

Quizplus · Accepted Answer

An omission of an adjustment for accrued rent would result in the liabilities being understated because the unpaid rent should be recognized as a liability. This would in turn lead to an overstatement of profit since the expenses (rent) are not properly recognized.

If an Adjustment for Accrued Rent Is Omitted from the Financial