The entry to record expired insurance is omitted. This error causes
A) assets to be overstated.
B) expenses to be overstated.
C) liabilities to be overstated.
D) liabilities to be understated.
E) an increase in liabilities on the balance sheet.

Question

Quizplus · Accepted Answer

When the entry to record expired insurance is omitted, the insurance expense is not recognized, and the prepaid insurance (an asset) is not reduced. This results in assets being overstated because the prepaid insurance asset remains higher than it should be.

The Entry to Record Expired Insurance Is Omitted