As at December 31, 20x1, the books of Poppy's Bar and Grill contained the following error:

The company did not record anything (in 20x1), related to a $12,000 invoice for advertising that took place in 20x1.

Which of the following statements correctly describes the impact of the error on the December 31, 20x1 financial statements?

Question 5 options:

	Expenses are understated, liabilities are understated, and there is no impact to shareholders' equity
	Expenses are understated, liabilities are understated, and shareholders' equity is overstated
	Expenses are understated, liabilities are overstated, and shareholders' equity is overstated
	Expenses are overstated, liabilities are understated, and shareholders' equity is overstated