What Is the Effect on the Financial Statements When a Company

Multiple Choice

What is the effect on the financial statements when a company fails to accrue salaries expense at year-end?

A) Net income is overstated and liabilities are understated.
B) Expenses are understated and stockholders' equity is understated.
C) Expenses and liabilities are both overstated.
D) Net income is overstated and liabilities are properly reporteD.Salary expenses that are not accrued result in expenses and liabilities being under-stated. Understated expenses result in overstated net income.