an accountant failed to record the adjusting entry for accrued revenues. how does this error affect the…

an accountant failed to record the adjusting entry for accrued revenues. how does this error affect the income statement?\n\na. the net income for the period will be understated.\nb. the liabilities at the end of the period will be understated.\nc. the liabilities at the end of the period will be overstated.\nd. the net income for the period will be overstated

an accountant failed to record the adjusting entry for accrued revenues. how does this error affect the income statement?\n\na. the net income for the period will be understated.\nb. the liabilities at the end of the period will be understated.\nc. the liabilities at the end of the period will be overstated.\nd. the net income for the period will be overstated

Answer

Brief Explanations:

Accrued revenues are revenues earned but not yet received or recorded. The adjusting entry for accrued revenues is to debit Accounts Receivable (an asset) and credit Revenue. Revenue is used to calculate net income ($\text{Net Income}=\text{Revenue}-\text{Expenses}$). If the adjusting entry is not recorded, revenue is understated. Since revenue is understated, net income (which depends on revenue) will also be understated. Liabilities are not affected by the accrued - revenue adjusting entry.

Answer:

A. The net income for the period will be understated.