Question

Please help with correct answer and explaination if possible, thx!(:

4. The accountant for Monroe Company mistakenly omitted the adjusting entry to record accrued fees of $2,000 for services provided to customers and not yet billed. Indicate the effect of the error on the income statement and the balance sheet by inserting "overstated" or "understated" in the space provided. If an item is not affected, leave the space blank. Assets Liabilities Stockholders Equity Revenues Expenses Net Income I 5. What is the normal balance of the following accounts? Accounts Payable Capital Stock Cash Utilities Expense Rent Revenue Vehicle Dividends Unearned Fees

Answer 1

4.

ASSETS	Under Stated by $2000	Because of the error in recording the sales, Debtor/Cash were also not recorded, hence asset side affected by $2000
LIABILITIES	----NO Effect----
STOCKHOLDERS EQUITY	Under Stated by $2000	If Sales was recorded then Sales will be increased by $2000, by this the profit would have been increased by $2000, since the Profit will be added to Equity, therefore it was understated by $2000.
REVENUE	Under Stated by $2000	Since the sales was not recorded hence revenue would have been increased by $2000.
EXPENCE	----NO Effect----
NET INCOME	Under Stated by $2000	Since renue was understated by $2000, and expence also booked against income,therefore net income would be understaed by $2000,