The company in the following question has made errors in accounting for the given transaction. State how these errors affected the financial statements.Your response should include both the direction of the effect (understatement / overstatement) and the amount of the effect for assets, liabilities, and shareholders' equity. If your response is "No Effect", please choose this option - no partial credit will be given for blank responses even if you "meant" no effect. (Hint: Think about what the correct way (or amounts) of accounting for the transaction would be, and compare it to what the company in the question actually did).

Illini Inc. manufactures and sells a bundled product of software and technical support to its clients. Illini typically receives payment from its customers up front for this product.In the last month of the 2020 fiscal year, Illini received $500,000 in cash from its customers for software that it would deliver and service in 2021.Illini's management is struggling to report earnings that will meet the estimates from the analyst community so it recorded this $500,000 as revenue for the 2020 fiscal year.

Assets=Liabilities+Shareholders' Equity

Overstated by

Understated by

No Effect