The accountant for Jones Auto Repair failed to make an adjus

The accountant for Jones Auto Repair failed to make an adjusting entry to record $5,000 of unpaid salaries for the last two weeks of the year. Which of the following is an effect of this omission?

a.The net income will be overstated.

b.The total assets will be understated.

c.The net income will be understated.

d.The total assets will be overstated.

Solution

The adjusting entry will be: Salaries expense 5000 Salaries payable 5000 ANSWER: a.The net income will be overstated. As the debit to salary expense has not been made because of this omission,the net income would have been overstated by $ 5000 & liabilities (salary payable) also would have been understated by the same amount