Which of the Following Errors Would Most Likely Lead to an Overstatement

question 29

Multiple Choice

Which of the following errors would most likely lead to an overstatement of income?

• A) Recording revenue in the next period when the cash is collected although it is earned in the current year.
• B) Recording an expense incurred in this year when the cash is paid next year.
• C) Failure to adjust deferred rent revenue account for the portion of rent earned this year.
• D) Failure to adjust prepaid expenses account for the portion of insurance expired this year.

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Definitions:

Stocks And Bonds

Financial instruments representing ownership in companies (stocks) and debt obligations (bonds).

Real Estate

Property consisting of land and the buildings on it, along with its natural resources.

Federal Reserve

The primary banking authority in the United States, tasked with overseeing monetary policy, regulating banks, and providing financial services.

Central Bank

A national financial institution that provides financial and banking services for its country’s government and commercial banking system, and implements the government’s monetary policy.