Question

At the end of October, the first month of the business year, the usual adjusting entry transferring rent earned to a revenue account from the unearned rent account was omitted. Indicate which items will be incorrectly stated, because of the error, on:______.
a) the income statement for October.
b) the balance sheet as of October 31. Also indicate whether the items in error will be overstated or understated.

Answer 1

Answer:

The income Statement for October

Explanation:

Unearned rent is the income prepaid which should be excluded from the actual income because it is not related to the current year .

Thus the income statement for the month of october will be overstated because of extra income shown which is received in advance but not earned.

There  will be no effect on the Balance sheet because the net profit transferred will is overstated and on the other hand the assets side of the balance sheet has not recorded the unearned rent as well due to a dual effect.