Assume That Accrual Basis Accounting Is Used

question 174

Multiple Choice

Assume that accrual basis accounting is used.Which of the following errors would most likely lead to an overstatement of net income in the current year?

• A)Recording revenue when the cash is collected next year although the performance obligation is satisfied in the current year.
• B)Recording an expense when paid next year although it is incurred this year.
• C)Failing to adjust the Deferred Revenue account for the portion of rent earned this year.
• D)Recording revenue earned in the current year when cash is collected this year.

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Definitions:

Nonfinancial Compensation

Benefits or incentives provided to employees that do not involve direct payment, such as health insurance, retirement plans, or company car.

Employee Recognition Programs

Schemes designed to acknowledge and reward employees for their performance and contributions to the organization.

Health Insurance

A form of insurance coverage that pays for medical and surgical expenses incurred by the insured, often offered by employers as part of benefits packages.

CPI

Stands for Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, used to estimate the economy's inflation rate.