CASE 10B Accounting records A newspaper article referred to a Gold Coast building company being wound up owing Queensland businesses more than $7.5 million. The article referred to the liquidator learning of creditors that weren’t listed in the company’s records.

1 From an accounting recording perspective, explain how the creditors would not be listed on the company’s balance sheet.

2 If creditors were not listed, what other balance sheet or income statement item is likely to be understated?