Question

A company makes an accrued revenue adjusting entry for $900 and an accrued expense adjusting entry...

A company makes an accrued revenue adjusting entry for $900 and an accrued expense adjusting entry for $700. How much was net income understated prior to these entries?

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Answer #1
Solution:
Net income understated prior to these entries was $200
Working Notes:
After an accrued revenue adjusting entry for $900 ,revenue will increased by $900
After an accrued expense adjusting entry for $700, expenses will increased by $700
So, after these entries net income will increased by $200   = $900-$700, So before these entry net income was understated by $200
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