Due to an oversight, the company bookkeeper made no adjusting entry for accrued and unpaid employee wages of $24,000 on December 31. This oversight would
A) Understate profit by $24,000
B) Have no effect on profit
C) Overstate profit by $24,000
D) Overstate liabilities
E) Have no effect on the balance sheet

Question

Quizplus · Accepted Answer

Accrued and unpaid employee wages of $24,000 represent an expense incurred by the company that has not yet been paid. Since no adjusting entry was made, this expense was not recorded in the financial statements for the year ended December 31. As a result, profit will be overstated by $24,000 (since expenses were understated by this amount). Therefore, the correct answer is (C) Overstate profit by $24,000.

Due to an Oversight, the Company Bookkeeper Made No Adjusting