Using IFRS, 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 current period if it’s not considered practicable to report it retrospectively. d. In the statement of comprehensive income.

Using IFRS, 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 current period if it’s not considered practicable to report it retrospectively. d. In the statement of comprehensive income.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter4: Income Measurement And Accrual Accounting

Section: Chapter Questions

Problem 4.23E: The Effect of Ignoring Adjusting Entries on Net Income For each of the following independent...

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The Effect of Ignoring Adjusting Entries on Net Income For each of the following independent situations, determine whether the effect of ignoring the required adjusting entry will result in an understatement (U), will result in an overstatement (O), or will have no effect (NE) on net income for the period.
If it is impracticable to determine the cumulative effect of an accounting change to any of the prior periods, the accounting change should be accounted for a. as a cumulative effect change on the income statement b. as a prior period adjustment c. on a prospective basis d. as an adjustment to retained earnings
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.
The effect of a revision of an accounting estimate must be recognised in profit and loss in which reporting periods? In the present, prior (by adjusting retained earnings) and future periods affected. In the present and future periods affected. In the present and prior reporting periods (by adjusting retained earnings). Not recognised in any period.
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 year
Why should the beginning retained earnings be adjusted for prior period errors and effects of change in accounting policy?
Generally accepted methods of accounting for a change in accounting principle include O ncluding the cumulative effect of the change in current period net income. restating prior years' financial statements presented for comparative purposes. O making a prior period adjustment. O prospective changes.
Which of the following is not a characteristic of non-counterbalancing error? a. If not detected, this is not automatically corrected in the next accounting period. b. The income statement of the period in which the non-counterbalancing error is committed is misstated. c. The statement of financial position of the year of non-counterbalancing error and succeeding statement of financial position are incorrect until the error is corrected. d. If the net income of one year is understated due to non-counterbalancing error, the net income of subsequent year is also affected.
If the statement of financial position error is discovered in the year of error, what action is to be done by the entity? Ignore the Reclassify the item to its proper real account. Adjust the effect to the retained earnings account. Reclassify the item to nominal account.
Where a change in accounting estimates occurs, which of the following should be disclosed? A. The nature of the change and the impact on previous income statements The fact that the amount of the effect on future periods will not be disclosed because B. estimating that amount is impracticable and the reason for the change and comparative data to show the impact with and without the change The fact that the amount of the effect on future C. periods will not be disclosed because estimating that amount is impracticable D. The reason for the change and comparative data to show the effect with and without the change
Where financial statements for a single year are being presented, a prior period error recognized in the current year ordinarily would a. Affect net income of the current year. b. Be shown as an adjustment of the affected component of equity at the start of the current year. c. Be included in the statement of recognized gains and losses. d. Be shown as an extraordinary item on the current year's financial statement of comprehensive income.
5. The following items affect the retained earnings account, except Group of answer choices a. net income or loss for the period b. prior period errors c. realization of revaluation surplus d. effect of change in accounting estimate