Question

X Company prepares monthly financial statements. The company received its bill from the utility company in June but did not pay it until July. Its accountant failed to record the utility expense in June, but instead recorded it in July when it was paid. As a result, which of the following is true regarding

      1) total assets on June 30
      2) total liabilities on June 30
      3) Net Income for June

   1) overstated;  2) correct;  3) overstated
   1) understated;  2) understated;  3) correct
   1) correct;  2) correct;  3) understated
   1) overstated;  2) overstated;  3) understated
   1) correct;  2) understated;  3) overstated
   1) understated;  2) overstated;  3) correct

Answer 1

Here Answer is 1) correct;  2) understated;  3) overstated

Reason

as accountant have not recorded the liability in June

so it will lead to

Firstly overstatement of income as utility expenses are not recorded so income will be shown more due to expenses being shown less

Secondly Understatement of liability as the liability for utility bill is not recorded

Not recording the utility bill due will not affect the assets in June

Hit Thumbs up if satisfied

Have any query mention in comment section please

Thank you