Question

At the end of the current​ year, the accountant for Computer​ Graphics, Inc. forgot to make an adjusting entry to accrue Wages Payable for the​ company's employees for the last week in December. The wages will be paid to the employees in January. Which of the following is an effect of this​ error? a) Net income is overstated.b) Liabilities are overstated.c)Net income is understated.d) Expenses are overstated

Answer 1

a) Net income is overstated

Step-by-step explanation:

As we already know that

To record the accrued wages, the journal entry is

Wages expense XXXXX

To wages payable XXXXX

(Being the wages expense is recorded)

This entry indicates the increases in expenses and decrease in net income but if this entry is not made or forgot to make than the condition would be reverse i.e expenses understated and net income overstated. On the other side, the liabilities are overstated i.e liabilities understated in case the entry is not made