At the end of the financial year,the usual adjusting entry for accrued salaries owed to employees was omitted.Which of the following statements is true?

Question

Quizplus · Accepted Answer

Omitting the adjusting entry for accrued salaries results in not recording an expense that was incurred but not yet paid. This means the salary expense for the year is understated, which in turn overstates the net profit. Since net profit is a component of retained earnings, which is part of shareholders' equity, shareholders' equity is overstated.

At the End of the Financial Year,the Usual Adjusting Entry