Accrued Revenue Adjustment

Steps:

• Identify adjustment: Rent owed by tenant is accrued revenue earned but unpaid.
• Apply accrual principle: Recognize revenue in period earned, regardless of cash receipt.
• Impact on profit: Increases revenue, boosting net profit for the year.
• Impact on assets: Records receivable as current asset, increasing total assets.

Why D is correct:

• Accrual accounting (per GAAP/IFRS) mandates recording earned revenue, which raises both profit (via income statement) and current assets (via balance sheet receivable).

Why the others are wrong:

• A: Reverses effects; adjustment increases, not decreases, profit and assets.
• B: Profit decreases incorrectly; revenue recognition raises profit.
• C: Assets decrease wrongly; receivable entry increases current assets.

Final answer: D