Question

Failure to record the purchase of office furniture on account will result in:

A. an overstatement of assets.

B. an understatement of liabilities.

C.an overstatement of stockholders' equity.

D.All of these.

Answer 1

To record a purchase of office furniture on account fixed asset account will be debited and accounts payable or liability will be credited.

Therefore failure of recording first transaction will not affect the stockholders equity and such transaction will understate the Asset as well as understate the liability. Because that asset has not been debited as well as the liability has not been credited.

Therefore the correct option is B

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