Failure to Make a Necessary Adjusting Entry for Accrued Interest

question 12

Multiple Choice

Failure to make a necessary adjusting entry for accrued interest on a note payable would cause which of the following?

• A) An understatement of liabilities and shareholders' equity.
• B) An overstatement of profit, an understatement of liabilities, and an overstatement of shareholders' equity.
• C) Profit to be understated and liabilities to be understated.
• D) Profit to be overstated and assets to be understated.

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Definitions:

Types of Fraud

Categories of deceitful activities intended to gain dishonest advantages, often financial in nature.

Effect

The result or outcome of a particular cause or action.

Fraudulent Misrepresentation

The act of deliberately misleading or deceiving another party with false statements or information, leading to their detriment on reliance of such misrepresentation.

Economic Duress

A situation where one party is forced into a contract or agreement under threats, making the consent given not truly voluntary.