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On January 31, the End of the First Month of the Year

question 26

Essay

On January 31, the end of the first month of the year, the usual adjusting entry transferring expired insurance to an expense account was omitted. Which items will be incorrectly stated because of the error on (a) the income statement for January and (b) the balance sheet as of January 31? Also indicate whether the items in error will be overstated or understated.


Definitions:

Aquarium

A tank or pool designed to hold aquatic plants and animals in controlled conditions for research, education, or display.

Wire Fence

A barrier made from wire, used to enclose or divide an area, typically for security or to keep livestock within a boundary.

Liable

Being legally responsible for something.

Drained Pool

A swimming pool whose water has been intentionally removed, often for maintenance or safety reasons.

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