Effects of Errors on Financial Statements
Indicate the Immediate Effect

question 82

Essay

Effects of errors on financial statements
Indicate the immediate effect of the following errors on each of the accounting elements described in the column headings below, using the following code: O = Overstated; U = Understated; NE = No Effect.
$\begin{array}{lccccc}&\text { Total}&\text { Total }&\text { Profit }&\text { Total }&\text { Total }&\text { Equity }\\\text { Error } & \text { Revenue } & \text { Expense } & & \text { Assets } & \text { Liabilities } \\\text { Example: Received } \$ 500 \text { cash for } & \mathrm{U} & \mathrm{NE} & \mathrm{U} & \mathrm{U} & \mathrm{NE}& \mathrm{U}\\\text {services rendered to a customer, but}\\ \text {recorded the transaction as \( \$ 50 \)}\\\text { (a.) Failed to record depreciation }\\\text { expense for the period.}\\\text { (b.) Recorded payment of an account }\\\text { payable by a credit to cash and debit }\\\text { to an expense account.}\\\text { (c.) Failed to accrue intereset earned}\\\text { on investments during the period.}\\\text { (d.) Recorded the purchase of office }\\\text { equipment on account as a debit to}\\\text { Supplies expense and a credit to }\\\text { Accounts Payable.}\end{array}$

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Definitions:

Crude Oil Price

Refers to the cost per barrel of unrefined petroleum, which fluctuates based on global supply and demand dynamics, geopolitical tensions, and market speculations.

Cheat

An act of dishonesty or unfairness to gain an advantage.

Monopoly

A market structure characterized by a single seller that controls the entire supply of a product or service, with no close substitutes.

Marginal Cost

Marginal cost is the change in total cost that arises when the quantity produced is incremented by one unit.