If the Total Amount for Insurance Expense Is Inadvertently Posted

question 44

Multiple Choice

If the total amount for Insurance Expense is inadvertently posted to Prepaid Insurance at the end of the year, what will be the effect on the year-end financial statements?

• A) Revenues will be overstated
• B) Revenues will be understated
• C) Owner's equity will be overstated
• D) Owner's equity will be understated

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Definitions:

Capital

Human-made resources (such as tools, equipment, and structures) used to produce other goods and services. They enhance our ability to produce in the future.

Adjustable Rate Mortgages

A type of mortgage loan where the interest rate periodically adjusts based on a specific benchmark, affecting monthly payments.

Interest Rates

The cost of borrowing money or the return on savings, expressed as a percentage of the principal amount per period.

Department of Housing and Urban Development

A U.S. government department responsible for national policies and programs that address America's housing needs, improve and develop the nation's communities, and enforce fair housing laws.