an accountant failed to record the adjusting entry for the expired amount of a prepaid expense. how does…

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

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

Answer

Brief Explanations:

When an adjusting entry for expired prepaid expense is not recorded, expenses are understated. Since net income = revenues - expenses, understated expenses lead to overstated net income. Liabilities are not affected by prepaid expense adjustments (prepaid expense is an asset).

Answer:

D. The net income for the period will be overstated