Accounting for IGCSE & O level - Accounting Procedures (Section 18 - No. 40)
A business owner discovered that a piece of equipment costing $5,000 was not recorded in the accounts. What is the immediate effect on the accounting equation?
Assets and Owner's Equity are both understated.
Assets and Liabilities are both overstated.
Assets and Owner's Equity are both overstated.
There is no immediate effect, the trial balance still balances.
Explanation
Failing to record the equipment means assets and owner's equity are understated.
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