The accountant for Diamond Jewelry Repair Services Company forgot to make an adjusting entry for Depreciation Expense for the current year.Which of the following is an effect of this error?

Question

Quizplus · Accepted Answer

When depreciation expense is not recorded, expenses are understated, leading to an overstatement of net income. Depreciation expense reduces the value of assets over time to reflect their usage and age, impacting the income statement by increasing expenses and decreasing net income. The error does not directly affect revenues, total assets in terms of their initial recognition (though their net book value is overstated), or total liabilities.

The Accountant for Diamond Jewelry Repair Services Company Forgot to Make