Question

3) Recognizing something as a revenue instead of a liability has a positive effect on the reported financial statements because:

a. It understates liabilities
b. It overstates revenues
c. It overstates net income
d. It overstates assets
e. All of the above
f. A, B and C are correct

Answer 1

Recognizing something as a revenue instead of a liability has negative effects on the reported financial statements.

Step-by-step explanation:

The statement in the question is not accurate. Recognizing something as a revenue instead of a liability does not have a positive effect on the reported financial statements. In fact, it can have negative consequences as it distorts the true financial position of the company. When something is recognized as a revenue instead of a liability, it overstates revenues and understates liabilities. Additionally, it can lead to an overstatement of net income and assets. Therefore, the correct answer is option f. A, B, and C are correct.