Which of the following is a consequence of a classification error?

A classification error in accounting occurs when a transaction is recorded in the wrong account category, which can significantly affect the integrity of the financial statements.

When a classification error happens, it often leads to inaccurate financial statements because the figures presented may not accurately reflect the company’s financial position or performance. This misrepresentation can have serious implications for decision-makers, stakeholders, and regulatory bodies relying on those statements for analysis.

Additionally, classification errors can result in incorrect asset valuation. For example, if an asset is mistakenly recorded as an expense, it would understate the company's assets and misrepresent its net income. This misclassification can affect both the balance sheet and the income statement.

Thus, both inaccuracies in financial statements and incorrect asset valuations are direct consequences of classification errors, making the choice that identifies both these outcomes the most comprehensive and accurate response.