Asked by Aaliya Smith on May 09, 2024
Verified
Failure to record a liability will probably
A) result in overstated net income.
B) result in overstated total liabilities and shareholders' equity.
C) have no effect on net income.
D) result in overstated total assets.
Net Income
The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue.
Total Liabilities
The sum of all financial obligations a company owes to outside parties, including loans, accounts payable, and any other debts.
- Analyze the effects of not recording a liability on financial statements.
Verified Answer
SB
stephanie barretoMay 09, 2024
Final Answer :
A
Explanation :
Failing to record a liability means that expenses may also be understated, leading to an overstatement of net income since expenses decrease net income when recognized.
Learning Objectives
- Analyze the effects of not recording a liability on financial statements.
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