At the End of the Fiscal Year, the Following Adjusting $\$ 3,000$

question 5

Essay

At the end of the fiscal year, the following adjusting entries were omitted:
(a) No adjusting entry was made to transfer the $\$ 3,000$ of prepaid insurance from the asset account to the expense account.
(b) No adjusting entry was made to record accrue d fees of $\$ 500$ for services provided to customers. Assuming that financial statements are prepared before the errors are discovered, indicate the effect of each error, considered individually, by inserting the dollar amount in the appropriate spaces. Insert "0" if the error does not affect the item.
$\begin{array}{llll}&&&\text { Error (a) }&\text { Error (b) }\\&\text { Overstated}&\text { Understated}& \text { Overstated } &\text { Understated} \\(1)\text { Assets at December } 31 \text { would be } &\$ & \$ & \$ &\$ \\(2) \text { Liabilities at Dec. } 31 \text { would be }&\$ & \$ & \$ &\$ \\(3)\text { Net income for the year would }be&\$ & \$ & \$ &\$ \\(4)\text { Retained earnings at Dec. 31 would be}&\$ & \$ & \$ &\$ \end{array}$

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Definitions:

Budgets

Financial plans that estimate revenue and expenditures over a specific time period.

Potential Bottlenecks

Points in the production process that can cause delays due to limited capacity or resources, impacting overall productivity.

Cash Collections

The total amount of money received from customers over a period, including payments for goods or services sold.

Schedule Of Cash Collections

A detailed plan that shows when a company expects to receive cash from accounts receivable or other revenue sources.