PRC-1 · Chapter 6 · Question 86 of 100
If an accountant completely omits the year-end adjustment for depreciation, how will the Statement of Financial Position be affected?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Non-current assets will be overstated, and equity will be overstated.
Explanation
Without the depreciation charge, accumulated depreciation is too low, making net assets too high (overstated). Concurrently, expenses are too low, making profit (and thus equity) too high (overstated).
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