Throughout an accounting period, the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Service Revenue. If the accountant fails to make the end-of-period adjusting entry to record the portion of these fees that has been earned, one effect will be

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If the accountant fails to make the end-of-period adjusting entry to record the portion of these fees that has been earned, it will result in an understatement of equity. This is because the unearned revenue account (a liability) will not be decreased, and the earned revenue (part of the legal service revenue) will not be recorded, leading to a lower overall revenue and net income figure.

Throughout an Accounting Period, the Fees for Legal Services Paid