If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show:
A) Assets overstated and equity understated.
B) Assets and equity both understated.
C) Assets overstated, net income understated, and equity overstated.
D) Assets, net income, and equity understated.
E) Assets, net income, and equity overstated.

Question

Quizplus · Accepted Answer

If depreciation is not recorded, assets are overstated because the accumulated depreciation is not deducted. Net income and equity are also overstated because expenses are understated, leading to higher reported profits.

If a Company Mistakenly Forgot to Record Depreciation on Office