Question

The accountant of Omega Consulting failed to make an adjusting entry to record $6,000 for unearned service revenues that were earned before the end of the fiscal year. Assume the company initially recorded a liability. Which of the following statements is true?
A.The total liabilities will be overstated.
B.The total assets will be overstated.
C.The total assets will be understated.
D.The total liabilities will be understated.

Answer 1

Answer: Option (A). The total liabilities will be overstated.

Explanation: Total liabilities are the aggregate debt and financial obligations owed by a business to individuals and organizations at any specific period of time. Total liabilities are reported on a company's balance sheet and are a component of the general accounting equation. In this scenario, Assuming the company initially recorded a liability, then the total liabilities will be overstated.