A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31. Which of the following statements is ?
A) It will have no effect on income.
B) It will overstate assets and liabilities by $9,000.
C) It will understate net income by $9,000.
D) It will understate assets by $9,000.
E) It will understate expenses and overstate net income by $9,000.

Question

Quizplus · Accepted Answer

Failing to record the accrued and unpaid employee salaries of $9,000 will result in not recognizing an expense that has been incurred. This means the company's expenses will be understated, and as a result, its net income will be overstated because expenses are lower than they should be.

A Company Made No Adjusting Entry for Accrued and Unpaid