Question

A law firm received $2,500 cash from a client for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered as of the last day of the accounting period, but no adjusting entry is made, this would cause
a.expenses to be overstated.
b.net income to be overstated.
c.liabilities to be understated.
d.revenues to be understated.

Answer 1

Answer:

D.

Revenues to be understated

Explanation:

Understated amounts indicate a reported amount is not correct and the reported amount is less than the true amount.