Q: 1. The balance in the prepaid insurance account before adjustment at the end of the year is $6,000. The amount of the journal entry required to record insurance expense will be $4,000 if the amount of unexpired insurance applicable to future periods is $2,000. True False 2. If the adjustment of the unearned rent account at the end of the period to recognize the amount of rent earned is inadvertently omitted, the net income for the period will be overstated. True False 3.If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account, which of the following describes the effect of the credit portion of the entry? a. decreases the balance of an owner's equity account. b. increases the balance of a liability account. c. increases the balance of an asset account. d. decreases the balance of an expense account.
A: Firstly, WHOA. This is not Economics my dear. This is Accounting. 1. True 2. True. Revenue overstated = Net Income overstated 3. b and d. does is accept two answers? B because liability account is a credit nature. to increase it, you have to credit it. D because and expense account is a debit nature. when you credit it, you are decreasing it. I hope the explanations are clear.