If an Adjustment for Accrued Income Is Omitted from the Financial

question 12

Multiple Choice

If an adjustment for accrued income is omitted from the financial reports the effect is:

• A) assets are understated; profit is understated.
• B) assets are overstated; profit is understated.
• C) assets are understated; profit is overstated.
• D) assets are overstated; profit is overstated.

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Definitions:

Investing Activities

Part of a company's cash flow statement that shows the amount of money spent or generated from various investment-related activities in a specific time period.

Financing Activities

Transactions involving issuing debt, equity, and paying dividends as reflected in a company's cash flow statement, indicating the flow of cash between a company and its owners and creditors.

Statement of Cash Flows

A document that illustrates the influence of balance sheet modifications and revenue on the availability of cash and equivalents, categorized by activities related to operating, investing, and financing.

Par Value

The face value of a bond or stock as stated by the issuing company, often used as an accounting standard or a minimum value.