explain the impact on the balance sheet and income statement, specifying which

accounts are affected and whether the balance is over or understated,   if

adjustments to recognize prepaid insurance as being expired and unearned revenue
as being earned, are not recorded

If the adjustment to recognize prepaid insurance as being expired is not recorded, it means that:
- Insurance expense is not debited.
- Prepaid insurance is not credited.
Prepaid insurance is a part of assets. Normally, the expired amount of insurance must be moved
from the assets account (prepaid insurance account) to the income statement account as
Insurance expense. If not, the assets will be overestimated. The balance sheet will be affected
and will not show the real value for assets (higher than in fact), liabilities (lower than in fact),
and equity (higher than in fact).
If the adjustment to recognize unearned revenue as being earned is not recorded, it means that:
- Unearned revenue is not debited.
- Service revenue is not credited.
Unearned revenue is a liability on the balance sheet. If the adjustment to recognize unearned
revenue as being earned is not recorded, unearned revenue (liabilities) is not decreased and
revenue (income statement) is not increased. Therefore, liabilities is overstated and revenue is
understated.

If the adjustment to recognize prepaid insurance as being expired is not recorded, it means that:
 Insurance expense is not debited.
 Prepaid insurance is not credited.
Prepaid insurance is considered an asset. Normally, the expired amount of insurance must be moved
from the assets account (prepaid insurance account) to the income statement account as an insurance
expense. If not, the assets will be overestimated. The balance sheet will be affected and will not show
the real value for assets (higher than in fact), liabilities (lower than in fact), and equity (higher than in
fact).
If the adjustment to recognize unearned revenue as being earned is not recorded, it means that:
 Unearned revenue is not debited.
 Service revenue is not credited.
Unearned revenue is a liability on the balance sheet. If the adjustment to recognize unearned revenue
as being earned is not recorded, unearned revenue (liability) is not decreased and revenue (income
statement) is not increased. Therefore, liability is overstated, revenue is understated, and equity is
understated than in fact.