On August 1, Rothesay Boat Club provided services on account for $800. Rothesay received the entire balance on August 31 and recorded the payment by debiting Cash for $800 and crediting Service Revenue for $800. On the August 31 financial statements
A) assets and revenues will be understated.
B) assets and liabilities will be overstated.
C) assets and revenue will be overstated.
D) assets and liabilities will be understated.

Question

Quizplus · Accepted Answer

The payment was recorded on August 31, but the services were provided on August 1. This means that the revenue was earned in August, but it was not recorded until September. As a result, the revenue will be overstated on the August 31 financial statements. Additionally, the cash received on August 31 will be recorded as an asset, which will overstate the assets on the August 31 financial statements.

On August 1, Rothesay Boat Club Provided Services on Account