Omission of Accrued Rent Receivable Adjustment

Steps:

• Accrued rent receivable records earned but unpaid rent as an asset and revenue.
• The adjusting entry debits rent receivable (increases current assets) and credits rent income (increases profit).
• Omitting this entry leaves current assets lower than actual (understated) and profit lower (understated).
• No liability is affected, as this is a revenue accrual, not an expense.

Why D is correct:

• Under accrual accounting principles, revenues are recognized when earned, so omission understates both assets and net income by the accrued amount.

Why the others are wrong:

• A: Incorrectly states assets and profit overstated, opposite of accrual omission effect.
• B: Assets are understated, not overstated; profit understated is correct but paired wrongly.
• C: Liabilities unaffected and profit understated, not no effect.

Final answer: D