Final answer:
If Jones Company does not record an adjusting entry for work completed worth $2,300, the income statement will be understated, as both revenue and the net income figures will be lower than they should be. Consequently, total assets and equity on the balance sheet will also be understated.
Step-by-step explanation:
Impact of Unrecorded Revenue on Financial Statements
If Jones Company has completed work amounting to $2,300 but has not billed the clients nor recorded the revenue, failing to make the appropriate adjusting entry at the year-end will affect the financial statements. Specifically, the income statement accounts will be understated. The revenue should be recognized in the period the work is completed according to the accrual basis of accounting. Not recording the earned revenue will result in lower total revenue and net income figures in the income statement for the period.
Income Statement: Revenue that is earned but not recorded will lead to an understatement of revenue and net income in the income statement for the year. Expenses may correctly match the period, but the revenue will not, misrepresenting the financial performance and potentially leading to incorrect decision-making.
Overall, without the adjustment, the total assets on the balance sheet will also be understated since the accounts receivable (or a similar asset account) will not reflect the amount owed to the company for services rendered. Moreover, equity will be understated as retained earnings will not include the income that was actually earned.