Recording revenue in 2012 that is actually earned in 2013 will result in:
A)overstatement of net income in 2012
B)overstatement of net income in 2013
C)understatement of net income in 2013
D)an overstatement of net income in 2012 and an understatement in net income in 2013
E)an overstatement of net income in 2013 and an understatement in net income in 2012

Question

Quizplus · Accepted Answer

Recording revenue in 2012 that is actually earned in 2013 will lead to an overstatement of net income in 2012 because the revenue is recognized earlier than it should be. Consequently, in 2013, when the revenue is actually earned, it will not be recorded again, leading to an understatement of net income for that year.

Recording Revenue in 2012 That Is Actually Earned in 2013