Beach Break Pty Ltd adopts the accrual method for proft determination. The Bookkeeper of Beach Break Pty Ltd did not include two days of wages owing amounting to $2,600. The amount owing relates to the 29th and 30th of June 2024. The financial year concludes on 30 June 2024.
The impact of the financial statements of NOT recording and reporting the two days of wages amounting to $2,600 would be
ire
2
O Wages expense would be overstated, retained earnings would be understated, and wages payable would be overstated.
O Wages expense would be understated, retained earnings would be overstated and wages payable would be overstated.
ine
O Wages expense would be overstated, retained earnings would be understated, and wages payable would be understated.
O Wages expense would be understated, retained earnings would be overstated and wages payable would be understated.
The impact of not recording and reporting the two days of wages amounting to $2,600 in the financial statements of Beach Break Pty Ltd would be that wages expense would be understated, retained earnings would be overstated, and wages payable would be understated. This is because the wages for those two days represent an expense that should have been recognized in the period when the service was provided (accrual basis), but it was not recorded. As a result, the profit for the year would appear higher than it actually is, retained earnings would be incorrectly inflated, and the liability for unpaid wages would not be reflected in the balance sheet.
