Lesson 18 Accounting Changes & Error Correction

Question 1

Recognizing the entire 2 year premium as expense is an error.
A correction of error is accounted for by?

Answer 1

Retroactively restating prior period financial statements

Question 2

A change in accounting estimate is reported?

Answer 2

Prospectively ( in the period of the change and for future periods if the change affects both)

Question 3

What is the appropriate reporting treatment for a change in accounting estimate ?

Answer 3

In the period of Change and future periods if the chance affects both

Question 4

How should a company report its decision to change from a cash basis of accounting to accrual basis of accounting?

Answer 4

As a prior period adjustment net of tax, by adjusting the beginning balance of retained earnings