What Is the Effect on the Financial Statements When a Company

question 11

Multiple Choice

What is the effect on the financial statements when a company fails to accrue revenue earned at year-end?

• A)Net income is understated and assets are understated.
• B)Revenue is understated and stockholders' equity is overstated.
• C)Revenue is understated and assets aren't affected.
• D)Net income is understated and liabilities are overstateD.Failure to accrue earned revenue results in revenues being understated and thus net income being understated.The resulting receivable is not increased to reflect the future payment for the earned revenue.