On August $1,$ Bailey Company paid $$12,600$ for two years of insurance in advance. Bailey debited Prepaid Insurance. If the appropriate adjusting entry is not made at the end of the year, what will be the effect on:

$($a$)$ Income statement accounts $($overstated$,$ understated, or no effect$)?$

$($b$)$ Net income $($overstated$,$ understated, or no effect$)?$

$($c$)$ Balance sheet accounts $($overstated$,$ understated, or no effect$)?$