If a company fails to adjust for accrued expenses, what effect will this have on that month's financial statements?

Assets will be overstated and net income and stockholders' equity will be overstated.

Expenses will be understated and net income and stockholders' equity will be overstated.

Assets will be overstated and net income and stockholders' equity will be understated.

Failure to make an adjustment does not affect the financial statements.