The accountant failed to make the adjusting entry to record the amount of interest owed on a note to the bank at the end of the year. This error would cause an overstatement of
A) assets.
B) expenses.
C) liabilities.
D) shareholders' equity.

Question

Quizplus · Accepted Answer

Failing to record interest owed results in an understatement of liabilities and an overstatement of shareholders' equity, as expenses are understated, leading to higher net income and retained earnings.

The Accountant Failed to Make the Adjusting Entry to Record