Question

The failure to record an adjusting entry for depreciation would cause assets to be overstated and net income to be understated.

a) True
b) False

Answer 1

The failure to record an adjusting entry for depreciation would cause assets to be overstated and net income to be understated.

Step-by-step explanation:

True, the failure to record an adjusting entry for depreciation would cause assets to be overstated and net income to be understated.

Depreciation is the gradual decrease in the value of an asset over time. It is an expense that represents the wear and tear or obsolescence of an asset.

By not recording an adjusting entry for depreciation, the company would not properly account for this expense, which would result in the assets being overstated on the balance sheet and the net income being understated on the income statement.