The Accountant for the Grassroots Company Failed to Make an Adjusting

question 47

Multiple Choice

The accountant for the Grassroots Company failed to make an adjusting entry to record revenue earned but not yet billed to customers.The effect of this error is:

• A)An overstatement of assets and of net income offset by an understatement of owners' equity.
• B)An overstatement of net income and an understatement of assets.
• C)An understatement of assets,net income,and owners' equity.
• D)An overstatement of liabilities offset by an understatement of owners' equity.

---

Definitions:

Shareholders' Equity

The residual interest or ownership held by investors in the assets of a corporation after deducting all its liabilities.

Adjusted Trial Balance

A list of all accounts and their balances after adjustments have been made, used to ensure that total debits equal total credits before preparing financial statements.

Ledger Account Balances

The current balances in ledger accounts, reflecting all transactions recorded over time.

Liability Account

An account documenting the obligations or debts a company owes to others, which must be settled over time.