In 2018, the accountant for Harris Pilton discovered an error. In 2017, the company failed to record $5,000 of a rent revenue. The company correctly included the rent revenue in its tax return and correctly reported its income taxes payable. The tax rate is 10%. Beginning retained earnings is $50,000 and net income is $30,000.

Instructions

Explain in your own words to the accounting department of this firm how this error should be corrected. Be sure to explain how this error affects the company's balance sheet and income statement accounts, and how correcting it will reflect on its balance sheet and income statement accounts.

Answer: