If an expense is understated in the current period,then
A)net income is understated in the current period.
B)net income is overstated in the current period.
C)revenues are overstated in the current period.
D)revenues are understated in the current period.
E)dividends are overstated in the current period.

Question

Quizplus · Accepted Answer

If an expense is understated, it means that the actual expenses are less than what they should be. This results in higher net income than what is accurate because expenses are deducted from revenues to calculate net income. Therefore, understating expenses leads to overstating net income.

If an Expense Is Understated in the Current Period,then