At year-end it was forgotten to accrue an income item. This will result in an:
A) understatement of assets and an overstatement of profit and equity.
B) overstatement of liabilities and an understatement of profit and equity.
C) overstatement of assets, profit, and equity.
D) understatement of assets, profit, and equity.

Question

Quizplus · Accepted Answer

Forgetting to accrue an income item means that both the assets and equity are understated, as revenue earned during the period has not been recognized. This also results in an understatement of profit or net income. Therefore, option D is the correct answer.

At Year-End It Was Forgotten to Accrue an Income Item