Homework Answers
Answer. A. Net income is overstated.
Reason:
The journal entry would be
Salary expense A/C dr
To Salaries payable account
This will give two effects one on balance sheet and another on statement of profit and loss.
If the entry is recorded it will result in increase in the expense and thus, reducing net income. And also increase in the liability of the company.
If the entry is not recorded then, the salary expense will be lesser and thus, decrease the expense resulting in an increase in overall net income. And also the liabilities will also show lesser amount.
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