Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615



Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem

Effect of omitting adjusting entry

The adjusting entry for accrued fees was omitted at October 31, the end of the current year. Indicate which items will be in error, because of the omission, on (a) the income statement for the current year and (b) the balance sheet as of October 31. Also indicate whether the items in error will be overstated or understated.

To determine

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability).

The effects on the balance sheet and income statement, if the adjusting entries are not recorded.

  • Given entry would increase accounts receivable account, and increase fees earned account for the amount of fees accrued. If the adjusting entry for accrued fees is not recorded, it will affect two accounts such as accounts receivable account (asset), and fees earned account (revenue)...

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