If a Company Fails to Make an Adjusting Entry to Record

question 133

Multiple Choice

If a company fails to make an adjusting entry to record supplies expense, then

• A) equity will be understated.
• B) expense will be understated.
• C) assets will be understated.
• D) net income will be understated.

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Definitions:

Overhead

Refers to the ongoing operational expenses not directly tied to the production of goods or services, such as rent, utilities, and administrative costs.

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, based on the percentage of completion.

Materials

The raw inputs or components used in the manufacturing or production process to create goods or products.

First Processing Department

The initial stage in a manufacturing process where raw materials are prepared or initial work is done.