Question

39. The accountant of Omega Consulting failed to make an adjusting entry to record $6,000 for...

39. The accountant of Omega Consulting failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year. Assume the company initially recorded a liability. Which of the following statements is true?

A.The total liabilities will be overstated.

B.The total assets will be overstated.

C.The total assets will be understated.

D.The total liabilities will be understated

Business   Accounting   
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Answer #1

Answer A.  The Total Liabilities willl be Overstated

As the company failed to pass the adjusting entry to record $6000 for unearned service revenue that is

cash a/c dr. $6000

To service income a/c $6000

( being cash received )

Service income A/c Dr. $6000

To Unearned Service income A/c $6000

( being Unearned Income Classified )

So as the company didn't pass entry for adjustment but consisdered AS ITS LIABILITY IN INTIAL STAGE so liabilities are overstated.

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