Final answer:
If a company fails to make the adjusting entry on December 31, it will have an impact on the financial statements. For example, failure to record depreciation expense can lead to overstatement of assets and equity on the balance sheet.
Step-by-step explanation:
If a company fails to make the adjusting entry on December 31, it will have an impact on the financial statements. Adjusting entries are made at the end of an accounting period to ensure accurate reporting. For example, if the company fails to record the depreciation expense for the year, it will overstate its assets and equity on the balance sheet, and its net income on the income statement will be higher than it should be.