The accountant for the Grassroots Company failed to make an adjusting entry to record revenue earned but not yet billed to customers.The effect of this error is:
A)An overstatement of assets and of net income offset by an understatement of owners' equity.
B)An overstatement of net income and an understatement of assets.
C)An understatement of assets,net income,and owners' equity.
D)An overstatement of liabilities offset by an understatement of owners' equity.

Question

Quizplus · Accepted Answer

Failing to record revenue earned but not yet billed results in an understatement of assets (accounts receivable), net income (since revenue increases net income), and owners' equity (as net income increases owners' equity).

The Accountant for the Grassroots Company Failed to Make an Adjusting