What is the impact of overstating an accrued expense during the 2020 fiscal year?

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Quizplus · Accepted Answer

Overstating an accrued expense means that expenses are recorded higher than they actually are. This leads to a decrease in net income because expenses are deducted from revenues to calculate net income. Consequently, with lower net income, the retained earnings, which is the accumulation of a company's net income over the years after paying out dividends, will also be lower. Therefore, ending retained earnings for 2020 will be understated.

What Is the Impact of Overstating an Accrued Expense During