At the end of July, the first month of the business year, the usual adjusting entry transferring rent earned to a revenue account

At the end of July, 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 July and (b) the balance sheet as of July 31. Also indicate whether the items in error will be overstated or understated.

Answer:
a.  Rent revenue (or revenues) will be understated. Net income will be understated.
b.  Unearned rent (liabilities) will be overstated. Owner’s equity at the end of the period will be understated.