Question

When a business receives a bill from the utility company, a journal entry should be made even though the invoice will not be paid until the following accounting period. (True or False)?

At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted (i.e., the entry was not made). Which of the following statements is true?

a. Net income will be understated (too low) for the current year.

b. Total liabilities and total assets will be overstated (too high).

c. The Balance Sheet and Income Statement will be misstated but the Statement of Retained Earnings will be correct for the current year.

d. Total assets will be overstated (too high) at the end of the current year.

Answer 1

When a business receives a bill from the utility company, a journal entry should be made even though the invoice will not be paid until the following accounting period

Assuming the business follows ACCRUAL basis of accounting, the answer isv TRUE so that the expense for a period matches the revenue earned.

At the end of the fiscal year, the usual adjusting entry for depreciation on equipment was omitted (i.e., the entry was not made). Which of the following statements is true?

Answer - Total assets will be overstated (too high) at the end of the current year.

-Net Income will be overstated since an expense is not booked
-Total liabilities will not have impact
-Statement of Retained Earnings would be incorrect since Net Income would be incorrect