A credit to a liability account was posted to an owner's equity account. This would cause
A) assets to be overstated.
B) liabilities to be understated.
C) owner's equity to be understated.
D) net income to be overstated.

Question

Quizplus · Accepted Answer

Posting a credit that should have gone to a liability account to an owner's equity account instead does not directly affect assets or net income. However, it does mean that the liability is not increased as it should be, leading to liabilities being reported as less than they actually are, hence understated.

A Credit to a Liability Account Was Posted to an Owner's