If a company forgot to record depreciation on office equipment at the end of an accounting period,the financial statements prepared at that time would show:
A)Assets overstated and equity understated.
B)Assets and equity both understated.
C)Assets overstated,net income understated,and equity overstated.
D)Assets,net income,and equity understated.
E)Assets,net income,and equity overstated.

Question

Quizplus · Accepted Answer

If depreciation is not recorded, assets are overstated because the accumulated depreciation is not deducted. Net income is overstated because depreciation expense is not recorded, leading to higher profits. Consequently, equity is also overstated as it includes the overstated net income.

If a Company Forgot to Record Depreciation on Office Equipment