Response to the following :
Assume that the error in Exercise was not corrected and that the $6,750 of accrued salaries was included in the first salary payment in January 2013. Indicate which items will be erroneously stated, because of failure to correct the initial error, on
(a) the income statement for January 2013 and
(b) the balance sheet as of January 31, 2013.
Exercise :
Accrued salaries of $6,750 owed to employees for December 30 and 31 are not considered in preparing the financial statements for the year ended December 31, 2012. Indicate which items will be erroneously stated, because of the error, on
(a) the income statement for December 2012 and
(b) the balance sheet as of December 31, 2012.
Also indicate whether the items in error will be overstated or understated.