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Stuck
jamesdrv:
--- Quote from: costargh on May 15, 2008, 07:36:16 pm ---Now in the current reporting period of July if someone just forgot to recognise accrued wages as aliability it woul Understate the liabilites because their would be $900 less in liabilities (Accrued wages).
--- End quote ---
The answer says "liabilities will be overstated", not understated.
If you don't recognize an accrued expense made in a previous period, then you will incorrectly recognize that expense in this period (i.e. when you actually pay the wages). An incorrect increase in expenses this period will result in an incorrect decrease in net profit this period. Hence, profit is understated. I'm basing this on the fact that you said the answer is D, as the question itself is not very clear. I think D is the correct answer given what the question is trying to ask.
costargh:
Lol shit my bad.
The wording is ambigious
elaine:
--- Quote from: jamesdrv on May 16, 2008, 01:03:35 am ---
--- Quote from: costargh on May 15, 2008, 07:36:16 pm ---Now in the current reporting period of July if someone just forgot to recognise accrued wages as aliability it woul Understate the liabilites because their would be $900 less in liabilities (Accrued wages).
--- End quote ---
The answer says "liabilities will be overstated", not understated.
If you don't recognize an accrued expense made in a previous period, then you will incorrectly recognize that expense in this period (i.e. when you actually pay the wages). An incorrect increase in expenses this period will result in an incorrect decrease in net profit this period. Hence, profit is understated. I'm basing this on the fact that you said the answer is D, as the question itself is not very clear. I think D is the correct answer given what the question is trying to ask.
--- End quote ---
oh cool, i get it now
thanks :)
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