Failure to Make an Adjusting Entry to Recognize Service Revenue

question 35

Multiple Choice

Failure to make an adjusting entry to recognize service revenue receivable would cause which of the following?

• A) An overstatement of assets and shareholders' equity and an understatement of profit.
• B) No effect on assets, liabilities, profit, nor shareholders' equity.
• C) An understatement of assets, profit, and shareholders' equity.
• D) An overstatement of assets, profit, and shareholders' equity.

---

Definitions:

Investors

Investors are individuals or entities that allocate capital with the expectation of receiving a financial return, often through the purchase of stocks, bonds, or real estate.

Trade-off

The concept of sacrificing one good or service to purchase or produce another.

Business Risk

The potential for financial loss or failure inherent in the operation of a business, influenced by market, industry, and internal factors.

Firm's Profits

The financial gain made by a company after deducting all expenses, costs, and taxes from its total revenue.