Question

A bookkeeper erroneously recorded the accrual of revenue using this journa Sales Discount Depreciation Expense The effect of this error on Total Expenses and Total Assets (respectively Select one: a. No Error, Understated Ob. Overstated, Understated c. No Error, No Error Od. Understated, No Error e. Understated, Understated The Vlasik Company declared an $8 cash dividend and recorded this journal entry (assume the amount is accurate, but not necessarily the accounts): Unearned Revenue Prepaid Insurance 58 Indicate the effect of the error on Net Income, Liabilities, and Owner's Equity, respectively: Select one: a. No Error, Understated, Overstated b. Understated, Understated, Understated c. No Error, No Error, No Error d. Understated, Understated, Overstated Overstated No Frror Overstated

Answer 1

Total Expenses was over stated by recording sales discounts as debit and Total expenses was understated by crediting equivalent amount. So net effect is No error for Total expenses. Whereas total assets are understated to the extent of accounts receivable for accrual income.

So answer is Option a)

Since entry made is assets and liability accounts, no effect on Net income and Liabilities are understated by recording unearend revenue as debit and Owners equity was overstated by not recording dividend in owners equity.

So answer is Option a)