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What is the effect of the omission of accrued liabilities for special insurance costs?

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Please help with the following problem. Provide at least 100 words.

On December 31, 2008, special insurance costs, incurred but unpaid, were not recorded. If these insurance costs were related to work in process, what is the effect of the omission of accrued liabilities and retained earnings in the December 31, 2008 balance sheet?

Accrued Liabilities Retained Earnings
a. Understated Overstated
b. No effect No effect
c. No effect Overstated
d. Understated No effect

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This posting discusses the effects of the omission of accrued liabilities for special insurance costs. The solution provides the answer but also includes two short paragraphs of explanation in 111 words.

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Problem: On December 31, 2008, special insurance costs, incurred but unpaid, were not recorded. If these insurance costs were related to work in process, what is the effect of the omission of accrued liabilities and retained earnings ...

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