A new accountant who tried to prepare the financial statements of an organization for the current year made an error. For the following item, indicate how the income statement and balance sheet are affected by the error and the nature of the effect. (For example, an error might cause revenues and net income on the income statement and retained earnings and assets on the balance sheet to be overstated)

1. An insurance policy was listed as an asset of $6,000 at the beginning of the year. The entire amount of the policy was for the current year and the policy has expired. The accountant took no action to recognize the expiration of the policy.