The correction of a material error discovered in a year subsequent to the year the error was made is considered a prior period adjustment. Briefly describe the accounting treatment for prior period adjustments.
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The correction of a material error discovered in a year subsequent to the year the error was made is considered a prior period adjustment. Briefly describe the accounting treatment for prior period adjustments.
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- An example of an item that should be reported as a prior-period adjustment in a company’s annual financial statements is a. a settlement resulting from litigation. b. an adjustment of income taxes. c. a correction of an error that occurred in a prior period. d. an adjustment of utility revenue because of rate revisions ordered by a regulatory commission.Corrections of errors that occurred on a previous periods financial statements are called ________. A. restrictions B. deficits C. prior period adjustments D. restatementsA change in the expected service life of an asset arising because additional information has been obtained is: a. an accounting change that should be reported by restating the financial statements of all prior periods represented b. an accounting change that should be reported in the period of change and future periods if the change affects both c. a correction of an error d. not an accounting change
- According to IAS 8, how should prior period errors that are discovered in a subsequent reporting period be recognized in the financial statements? a. As an adjustment to beginning retained earnings for the reporting period in which the error was discovered. b. As a note in the financial statements that the error was previously made but has since been corrected. c. In the statement of comprehensive income. d. Retroactively for all periods presented.Which of the following is not a counterbalancing error? Non-recognition of the unused portion of office supplies at year end. Omission of accrued interest expense at year end. Non-recording at year end of rent already earned but uncollected. Overstatement of depreciation for the current year.What will be the result for failing to record the year-end adjustment for accrued interest on a note payable? O An understatement of expense and an understatement of current liabilities An understatement of expense and an overstatement of current liabilities An overstatement of expense and an understatement of current liabilities An overstatement of an expense and an overstatement of current liabilities
- If the income statement error is discovered in a subsequent accounting period, what action is to be done by the entity? Group of answer choices a. Reclassify the item to its proper nominal account and restate the income statement of the prior year affected by the error. b. Restate the income statement of the prior year affected by the error. c. No reclassifying entry is necessary but restate the income statement of the prior year affected by the error. d. Reclassify the item to its proper nominal account. Recording of next year's sales as sales of the current year will Group of answer choices a. overstate net income of next year b. not affect retained earnings at the end of next year c. understate retained earnings at the end of the current year d. understate net income of the current yearChoose the correct. How should material seasonal variations in revenue be reflected in interim financial statements?a. The seasonal nature should be disclosed, and the interim report should be supplemented with a report on the 12-month period ended at the interim date for both the current and preceding years.b. The seasonal nature should be disclosed, but no attempt should be made to reflect the effect of past seasonality on financial statements.c. The seasonal nature should be reflected by providing pro forma financial statements for the current interim period.d. No attempt should be made to reflect seasonality in interim financial statements.At December 31, the end of the reporting period, the analysis of a loss contingency indicates that an obligation is only reasonably possible, though its dollar amount is readily estimable. During February, before the financial statements are issued, new information indicates the loss is probable. What accounting treatment is warranted?
- Which of the following types of errors will not self-correct in the next year? Accrued expenses not recognized at year-end Accrued revenues that have not been collected not recognized at year-end Depreciation expense overstated for the year Prepaid expenses not recognized at vear-endAdjustment accounts are needed every year because of errors made during the year False TrueWhat is the impact of accrued expenses before year end adjusting entries ? The answer is .A. Understate expenses and understate liabilities. B. Understate assets and understate expenses . C. Overstate assets and understate expenses . D. Understate expenses and overstate liabilities.
