If the adjusting entry to accrue interest on a note receivable is omitted, then assets, net income, and stockholders' equity will be understated.
What is an adjusting entry ?
- Adjusting entries are modifications to previously written entries in your diary. They specifically check that the data you have recorded corresponds to the appropriate accounting periods.
- Accrued revenues, accrued expenses, unearned revenues, prepaid expenses, and depreciation are the five types of adjustments entries.
- Utility bills, salaries, and taxes are a few examples of expenses that are typically billed at a later time after they have been incurred. An adjustment entry is made to eliminate the account payable that was previously recorded together with the accumulated expense when the cash is paid.
- If the adjusting entry on a note receivable is omitted, then assets, net income, and stockholders' equity will be understated.
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