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21.07.2022 - 12:32

A & D Window Cleaning performed $450 of services but has not yet billed customers for the month. If A & D fails to record the adjusting entry, what is the impact on the financial statements? a. balan

Question:

A & D Window Cleaning performed $450 of services but has not yet billed customers for the month. If A & D fails to record the adjusting entry, what is the impact on the financial statements?

a. balance sheet: assets understated; equity overstated income statement: expense understated

b. balance sheet: liabilities overstated; equity understated income statement: revenues understated

c. balance sheet: assets overstated, equity understated income statement: expenses understated

d. balance sheet: assets understated, equity understated income statement: revenues understated

Answers (0)

Sharen April 9, 2023 в 13:08

The correct answer is option d. If A & D Window Cleaning fails to record the adjusting entry, the impact on the financial statements is that assets and equity are understated, and revenues are understated on the income statement. This is because the $450 worth of services performed but not yet billed represent revenues earned but not yet recognized. Therefore, if this adjusting entry is not recorded, the financial statements will not reflect the full extent of the company's revenues, assets, and equity, leading to an understatement of these items.

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