The accountant of Zeus Legal Services failed to make an adju

The accountant of Zeus Legal Services failed to make an adjusting entry for supplies that had been used for the year. Assume the supplies were initially recorded as an asset. Which of the following statements is true?

A-The total liabilities will be overstated

B. The equity will be understated.

C. The total assets will be overstated.

D. The total assets will be understated.

Solution

C. THe total assets will be overstated

This is becuase since the supplies were recorded as an asset and when these supplies are used during the period, an adjusting entry is passed which is :

Supplies expenses Dr.

To Supplies account

This entry will decrease the supplies(asset) and increase the supplies expense.

Since the entry was not passed, the supplies is still stated at the original amount in the balance sheet and thus it is overstated.