If the Total Amount for Insurance Expense Is Inadvertently Posted

question 79

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) Expenses will be understated
• B) Owner's equity will be overstated
• C) Net income will be overstated
• D) All of these are true

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Definitions:

Bookkeeper

A person responsible for recording the financial transactions and maintaining the financial records of a business.

Basic Accounting Equation

An equation representing the relationship between a company's assets, liabilities, and shareholders' equity (Assets = Liabilities + Equity).

Transactions

Any business activity that involves the exchange of goods, services, or money between two or more parties.

Total Assets

The sum of all current and non-current assets owned by a business.