9B Error Correction Flashcards
An error can occur from…3 things
1 mathematical mistakes
2 mistakes in applying GAAP
3 oversight of facts that existed when financial statements were
Prepared
Accounting errors are errors in…
Recognition, measurement, presentation or disclosure in the
financial statements
A change in accounting principle from non-GAAP to GAAP is…
A correction of an error
An error in financial statements is treated as a…
Prior period adjustment by restating prior period financial
Statements
The cumulative effect of the error is reflected in the carrying value of assets and liabilities at the beginning of the first period presented, with an offsetting adjustment to…
The opening balance in retained earnings for that period
Inventory errors have an impact on both…
The balance sheet and income statement
Inventory errors:
A misstatement of ending inventory balance is followed by a…
2) an inventory error could also be a…
Misstatement of the beginning balance for the next period
2) misstatement of purchases for the period
Under IFRS, accounting for error correction is similar to…
US GAAP
Under IFRS, a prior period error includes…3
1 arithmetic mistakes
2 mistakes in applying accounting policies
3 mistakes in recognition, measurement, presentation or
Disclosure on financial statements
IFRS requires the entity to correct the error by…
Restating the comparative amounts for prior periods
Under IFRS, if the error occurred before the earliest period presented, then the opening balances of assets, liabilities and equity should be…
Restated for the earliest period presented
Under IFRS, similar to GAAP, if it is impracticable to determine the periodic effects of the error, comparative information is…
Restated from the earliest date practicable
Dealing with errors from 1 period mead they aren’t…
Counter balancing errors
What 3 methods of depreciation is salvage value subtracted?
1 straight line
2 sum of years digits
3 units of production
What depreciation method does not subtract salvage value?
Declining balance
When beginning inventory is understated, COS is…
2) When ending inventory is understated, COS is…
Understated
2) overstated
What happens to counterbalancing errors in the next period?
they automatically correct in the next period
Correction of an error affects…
Beginning retained earnings
Correction of errors on financial statements are corrected…
Net of tax
Correction journal entries are recorded at…
Gross amount (not net of tax)
A change in accounting principle is a change from…
One generally accepted principle to another generally accepted principle
A change from an unacceptable principle to a generally accepted one is…
A correction of an error
Cash basis is an…
Unacceptable accounting principle
If inventory is understated by $10,000 in the company’s year 1 financial statements how should it be adjusted?
Restate the financial statements with corrected balances
For all periods presented
