Question

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

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

Answer 1

B. Net income is understated.

Step-by-step explanation:

While computing the bills for an organization, if one makes an error while valuation of the of the goods or an inventory or a depreciation expenses, on the balance sheet, then it causes a corresponding error in the balance sheet for the company, which is represented on the income statement.

Thus in the context, when the accountant of Christiane company did not make an entry of the depreciation cost in the balance sheet for the current year, it produces an error for the current year in the form of the net income that is being understated.