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The current pay period ends on​ Friday, January​ 2, yet the​ company's fiscal​ year-end is on​ Wednesday, December 31. If the company does not make the proper adjusting entry to accrue payroll expenses at​ year-end, what would be the​ impact? A. Operating income will be overstated. B. Assets will be understated. C. ​Stockholders' equity will be understated. D. Liabilities will be overstated.

Respuesta :

Parrain

If the company does indeed fail to make the appropriate entry, a situation would arise where C. ​Stockholders' equity will be understated.

When salaries are accrued, they are sent to the accrued expenses account which means that they:

  • Are treated as liabilities
  • Will not be deducted from net income

If instead these expenses are not accrued and are instead deducted from the net income, the net income will be lower than it should be and because net income is an equity entry, the stockholders equity will be lower than it should be.

In conclusion, the stockholders' equity will be understated if the salaries are not accrued.

Find out more at https://brainly.com/question/14304434.

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