Question

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on december 31. this oversight would:

Answer 1

This oversight would overstate net income by $28,000. Since the company's books show that they accrued $28,000 but did not pay it out in employee wages, they are overstating what they actually made by $28,000. Once they fix their books to show that the revenue was actually paid out in employee wages, they will see that they did not actually keep that revenue.

Answer 2

Salaries expense understated

Salaries payable understated

Net profit overstated

Step-by-step explanation:

Accrued expenses are expenses that are already incurred but not recorded in the account books.

It is a common occurrence towards the end of the business year as most activities around that period roll over to the next accounting year , and if these activities are not cut off as required , the aim of accrual basis of accounting is defeated.

If the $28,000 end of the year wages is not accounted for , the expenses for the incumbent year will be understated by $28,000 and the incoming year overstated,

Salaries payable for the incumbent year understated by $28000 and the profit for the year overstated by $28,000