Are accounting changes permitted in financial statements?
Answer to Problem 21.1Q
Accounting changes are allowed in financial statements of company only up to a certain extent and must depict true and accurate financial position of the company.
Explanation of Solution
Accounting Change:
Accounting change includes the change in accounting method, accounting principle or standard. It is the change in the method of calculation of profit and loss statement of company. For example: A company changes its method from effective interest rate method to straight line method this is called the Accounting change.
- Accounting change is permitted but only up to a certain extent and these changes must be justified to the management of company.
- These changes must depict true and accurate financial position of the company.
- These changes should be disclosed to the users, investors, authorities so that they can compare and analyze the financial statement of company.
- Also, Changes are in limit not reoccurring every time.
Hence, accounting change ispermitted in financial statements.
Want to see more full solutions like this?
Chapter 21 Solutions
INTERMEDIATE ACCOUNTING-MYACCOUNTINGLAB
Additional Business Textbook Solutions
Principles of Accounting Volume 1
Advanced Financial Accounting
Intermediate Accounting
Financial Accounting: Tools for Business Decision Making, 8th Edition
Fundamentals of Cost Accounting
Managerial Accounting (4th Edition)
- How does the concept of uniformity relate to comparability in the accountingliterature?arrow_forwardWhat are the disclosure requirements for provisions and contingent liabilities in financial statements?arrow_forwardWhat are the effect of unclassified accounts in the financial statements to the stakeholdersarrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTAuditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College PubCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning