If a Company Does NOT Record Accrued Wages Expense at the End

question 43

Multiple Choice

If a company does NOT record accrued wages expense at the end of the year, how does this affect the year-end financial statements?

• A) Overstates revenue
• B) Overstates expenses
• C) Overstates assets
• D) Overstates owner's equity

---

Definitions:

Statement of Cash Flows

A financial report that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Indirect Method

A way of calculating cash flows for operating activities in the cash flow statement by adjusting net income for changes in non-cash items.

Operating Activities

Operating activities involve the day-to-day functions of a business directly related to its provision of goods and services.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.