If a Company Fails to Make an Adjusting Entry to Record

question 60

Multiple Choice

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

• A)stockholders' 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:

GAAP

Generally Accepted Accounting Principles, the standard framework of guidelines for financial accounting.

Capital Lease

A long-term lease agreement that designates the lessee (the person who rents the asset) as having the financial responsibilities and benefits of ownership.

Long-Term Asset

A long-term asset is an asset that is not expected to be converted into cash within a year and is used over a long period, such as property, plant, and equipment.

Intangible Asset

An asset that lacks physical substance and usually is very hard to evaluate, such as patents, trademarks, and copyrights.