Response to the following questions:
1. A deferral is the delay in recording an expense already paid, such as prepaid insurance. Wages payable is considered an accrued expense or accrued liability. Fees earned is a revenue item. Accumulated depreciation is a contra account to a fixed asset.
2. The failure to record the adjusting entry increasing Rent Revenue, $600, and decreasing Unearned Rent, $600, would have the effect of overstating liabilities by $600 and understating net income by $600.