If the Accountant Failed to Make the End-Of-Period Adjustment to Reduce

question 125

Multiple Choice

If the accountant failed to make the end-of-period adjustment to reduce the Unearned Management Revenue account by the amount of management revenue earned, the omission would cause

• A) an overstatement of profit
• B) an overstatement of assets
• C) an overstatement of liabilities
• D) an overstatement of equity
• E) an understatement of expenses

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Definitions:

Financial Leverage

The use of borrowed money to increase the potential return of an investment, which also increases the risk of loss.

EPS

Earnings Per Share, a measure of a company's profitability calculated by dividing its net earnings by the number of outstanding shares.

Earnings Per Share

A company's net income divided by the number of its outstanding shares, indicating the company's profitability on a per-share basis.

Debt

An amount of money borrowed by one party from another, typically repaid with interest.