Failure to adjust for accrued revenue results in net income being understated and assets being understated.

Question

Quizplus · Accepted Answer

Accrued revenue is income earned but not yet received. If it's not adjusted in the financial statements, the company's net income will be lower than it actually is because the revenue hasn't been recognized. Similarly, assets will be understated because accrued revenue also represents a right to receive money, thus increasing the company's assets when recognized.

Failure to Adjust for Accrued Revenue Results in Net Income