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If a company fails to record a sale on account:

1. accounts receivable on the balance sheet will be overstated.

2. revenue on the income statement will be overstated.

3. net income on the income statement will still be correct. 

4. assets on the balance sheet will be understated. 

 

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Darryn D'Souza
Darryn D'SouzaLv10
13 Feb 2021
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Related questions

Effect of Errors in Physical Inventory

Fonda Motorcycle Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31, 2016, Fonda Motorcycle Shop incorrectly counted its inventory as $337,500 instead of the correct amount of $328,850.

Enter all amounts as positive numbers.

a. State the effect of the error on the December 31, 2016, balance sheet of Fonda Motorcycle Shop.

Balance Sheet Items Understated / Overstated Amount
Merchandise Inventory Overstated $
Current Assets Overstated $
Total Assets Overstated $
Owner's Equity Overstated $

b. State the effect of the error on the income statement of Fonda Motorcycle Shop for the year ended December 31, 2016.

Income Statement Items Understated / Overstated Amount
Cost of Merchandise Sold Understated $
Gross Profit Overstated $
Net Income Overstated $

c. If uncorrected, what would be the effect of the error on the 2017 income statement?

Income Statement Items Understated / Overstated Amount
Cost of Merchandise Sold Overstated $
Gross Profit Understated $
Net Income Understated $

At March 31, the end of the first month of operations, the usualadjusting entry transferring prepaid insurance expired to anexpense account is omitted. Which items will be incorrectly stated,because of the error, on (a) the income statement for March and (b)the balance sheet as of March 31? Also indicate whether the itemsin error will be overstated or understated.

a. Income Statement

Insurance Expense

Select

Overstated orUnderstated
Net Income

Select

Overstated or Understated

b. Balance Sheet

Prepaid Insurance SelectOverstatedUnderstatedCorrectItem 3
Stockholders' Equity

What happens if the amount of uncollectible account expense is overstated at year-end?

a. net income will be overstated.

b. stockholders’ equity will be overstated.

c. Allowance for Doubtful accounts will be understated.

d. net Accounts Receivable will be understated.

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