If a company forgot to prepare an adjusting entry to record salaries and wages incurred but unpaid at the end of the period,Total Liabilities would be understated and Retained Earnings would be understated on the Balance Sheet.

Question

Quizplus · Accepted Answer

If the adjusting entry to accrue unpaid salaries and wages is not made (Salaries and Wages Payable)a liability account will be understated,which means that Total Liabilities will be understated.Salaries and Wages Expense would also be understated,which means that expenses would be understated and net income will be overstated.This overstatement of net income would cause Retained Earnings to be overstated.

If a Company Forgot to Prepare an Adjusting Entry to Record