Asked by Isabelle Manaytay on Jul 09, 2024
Verified
A credit to an asset account was posted as a credit to a liability account. This error would cause:
A) assets to be understated.
B) liabilities to be overstated.
C) capital to be understated.
D) None of the above is correct.
Liability Account
A financial accounting ledger that represents debts or obligations a company owes to others.
Asset Account
An account that records the value of assets owned by an individual or organization, including cash, equipment, and inventory.
Capital
Financial assets or the financial value of assets, such as cash and goods, used by a business to generate wealth through investment or production.
- Identify and rectify prevalent mistakes in accounting and understand their effects on financial reports.
Verified Answer
RC
Roshell CampbellJul 13, 2024
Final Answer :
B
Explanation :
When a credit that should have gone to an asset account is mistakenly posted to a liability account, it increases the liability account. Since the asset account did not receive the credit it should have, liabilities are overstated as a result of the error.
Learning Objectives
- Identify and rectify prevalent mistakes in accounting and understand their effects on financial reports.