Failure to make an adjusting entry to recognize service revenue receivable would cause which of the following?
A)an overstatement of assets,profit,and shareholders' equity.
B)an overstatement of assets and shareholders' equity and an understatement of profit.
C)no effect on assets,liabilities,profit,nor shareholders' equity.
D)an understatement of assets,profit,and shareholders' equity.

Question

Quizplus · Accepted Answer

Failure to make an adjusting entry to recognize service revenue receivable would result in an understatement of assets because the amount receivable is not recorded as an asset, an understatement of profit because revenue earned is not recognized, and an understatement of shareholders' equity because profit contributes to shareholders' equity.

Failure to Make an Adjusting Entry to Recognize Service Revenue