Effect of Omitting Adjusting Entry The adjusting entry for accrued fees was omitted at the end of the current year. Indicate which items will be in error, because of the omission, on (a) the income statement for the current year and (b) the balance sheet at the end of the year. Also indicate whether the items in error will be overstated or understated. a. Income Statement Revenues Expenses Net Income b. Balance Sheet Assets Liabilities Owner's equity Understated