Answer:
True
Explanation:
An adjusting entry for accrued interest expense will be recorded as follows in the books of the owing entity.
Debit Interest expenses account - (this will increase expenses)
Credit Interest payable (liability) account - (this will increase liability)
Therefore, without the above adjusting entry
- Liabilities will be understated, since the adjusting entry would have increased liability
- Interest expenses will be understated, since the adjusting entry would have increased interest expenses
- Net Income will be overstated, since a higher interest expense by the adjusting entry would have reduced net income
- Stockholders' equity will be overstated, since a higher interest expense by the adjusting entry would have reduced net income which would in turn reduce stockholders' equity.
