Question

The accountant for Noble Jewelry Corporation forgot to make an adjusting entry for Depreciation expense for the current year. Which one of the following is one of the effects of this error?

A. Total assets are understated.
B. Net income is overstated.
C. Revenues are understated.
D. Total liabilities are understated.

Answer 1

The effect of not making an adjusting entry for Depreciation expense is that net income is overstated.

Step-by-step explanation:

The effect of the accountant forgetting to make an adjusting entry for Depreciation expense for the current year is that net income is overstated.

When depreciation expense is not recorded, it leads to an overstatement of net income because expenses are understated, resulting in a higher net income than the actual amount. This error affects the accuracy of the income statement and can misrepresent the financial position of the company.