The Accountant Failed to Make the Adjusting Entry to Record

question 46

Multiple Choice

The accountant failed to make the adjusting entry to record the amount of interest owed on a note to the bank at the end of the year. This error would cause an overstatement of

• A) assets.
• B) expenses.
• C) liabilities.
• D) shareholders' equity.

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Definitions:

Substitute Purchases

Substitute Purchases refer to the buying of goods or services as a replacement for those which were part of a contract that was not fulfilled as agreed.

Incidental Damages

Secondary or additional expenses incurred by a non-breaching party to mitigate losses following a breach of contract.

Contract Price

The total agreed-upon amount that will be paid for the completion of contractual obligations.

Anticipatorily Breached

This refers to a situation in law where a party indicates, either through their actions or words, that they will not fulfill their contractual obligations before the performance is due.