question archive At the end of 20X1, Potter Corp
At the end of 20X1, Potter Corp
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At the end of 20X1, Potter Corp. failed to record accrued salaries expense of $4,000. As a result of this error, which of the following is true regarding its financial statements for 20X1? (check all that apply Select one or more:
a. Assets are too low (understated).
b. Liabilities are too high (overstated).
c. Net income is too high loverstated).
d. Net income is too low (understated)
e. Assets are too high (overstated)
f.Liabilities are too low (understated)
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The answer is option C and option F.
If a company failed to record the accrued salaries it means , the profits of company will be show higher amount than actual and liabilities will show lesser amount than actual figure.
Financial statement are made on accrual basis. Salary accrued should be deducted from from profits And should be shown as liability in balance sheet. If company missed the accrual salaries it means it is showing more profit than actual snd also showing less liabilities than actual.
