X Company prepares monthly financial statements. The balance in Unearned (Deferr

Question

X Company prepares monthly financial statements. The balance in Unearned (Deferred) Revenue on October 1 is $1,356. As of October 31, $423 of the $1,356 had been earned, but the accountant failed to record the appropriate adjusting entry. What was the effect on the October 31 Balance Sheet? Total liabilities would be overstated by $423. Retained Earnings would be overstated by $423. Retained Earnings would be understated by $933. Total liabilities would be overstated by $933. Total liabilities would be understated by $933. Total assets would be understated by $423.

Explanation / Answer

Total liabilities would be overstated by $423.

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