Question

If the adjustment for accrued expenses is not recorded a.net income will be understated. b.revenues will be understated. c.net income will be overstated. d.expenses will be overstated.

Answer 1

Answer:

The correct option is C

Explanation:

Accrued expenses is an accounting term that refers to an expense that is recognized on the books before it has been paid. So if accrued expenses are not recorded the business net income will be overstated.

Answer 2

Answer:

Explanation: An accrued expense can be simply defined as an expense that was incurred but not yet paid or recorded. The following effect will reflect on a company's financial statement if the company fails to adjust for accrued expenses: its expenses will be understated and net income and stockholders' equity will be overstated. The net income will be overstated since the accrued expense is not recorded. Unrecorded accrued expense also means that the corresponding expense is not recorded and properly deducted from net income leading to overstatement of the net income.