Accounting for changes & errors

Question 1

When doing retrospective application for change in accounting principle

Answer 1

You use the beginning retained earnings account from the earliest period possible.

Question 2

When making error corrections

Answer 2

You adjust beginning retained earnings in the year of corrections & the account in error.

Question 3

Pretax income for accounting errors & changes

Answer 3

Basically income statement shit does not affect retained earnings, but balance sheet shit does.

Question 4

What is a Prior period adjustment for

Answer 4

It’s for a correction of an error not a change in accounting principle.