Accounting for IGCSE & O level - Accounting Procedures (Section 23 - No. 32)
A machine was purchased for $10,000 on credit, but the bookkeeper only recorded the transaction in the purchases journal. How will this error affect the financial statements?
Assets will be understated and liabilities will be overstated.
Assets will be overstated and liabilities will be understated.
Assets will be understated and liabilities will be understated.
Assets will be overstated and liabilities will be unaffected.
Explanation
The machine (asset) and the liability to pay (liability) will be understated.
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