Assume that accrual basis accounting is used.Which of the following errors would most likely lead to an overstatement of net income in the current year?
A) Recording revenue when the cash is collected next year although it is earned in the current year.
B) Recording an expense when paid next year although it is incurred this year.
C) Failing to adjust the Unearned Revenue account for the portion of rent earned this year.
D) Recording revenue earned in the current year when cash is collected this year.

Question

Quizplus · Accepted Answer

Recording an expense when paid next year although it is incurred this year (B) would lead to an understatement of expenses and an overstatement of net income in the current year. The other choices either correctly record revenue earned in the current year or adjust for unearned revenue in the current year.

Assume That Accrual Basis Accounting Is Used