Failure to make an adjusting entry to recognize accrued salaries payable would cause which of the following?
A)an understatement of expenses and liabilities and an overstatement of shareholders' equity.
B)an overstatement of expenses and liabilities.
C)an understatement of expenses,liabilities and shareholders' equity.
D)an understatement of assets and shareholders' equity.

Question

Quizplus · Accepted Answer

Failure to record accrued salaries payable results in expenses and liabilities being understated because the salaries expense and the corresponding liability are not recorded. This also causes an overstatement of shareholders' equity, as expenses are understated, leading to higher net income and retained earnings.

Failure to Make an Adjusting Entry to Recognize Accrued Salaries