Assume That Accrual Basis Accounting Is Used

question 87

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

---

Definitions:

Interest Rate

The Interest Rate is the percentage at which interest is paid by borrowers for the use of money they borrow from a lender, commonly expressed as an annual percentage.

Aristotle

An ancient Greek philosopher and polymath who made significant contributions to numerous fields of study, including metaphysics, ethics, politics, and natural science.

Usury

Charging an excessively high or illegal rate of interest on borrowed money.

Joseph Schumpeter

An economist and political scientist known for his theories on economic innovation and the concept of "creative destruction" in capitalism.