SMU ACCT 3311 - Accounting Changes and Error Analysis (24 pages)

Previewing pages 1, 2, 23, 24 of 24 page document View the full content.
View Full Document

Accounting Changes and Error Analysis



Previewing pages 1, 2, 23, 24 of actual document.

View the full content.
View Full Document
View Full Document

Accounting Changes and Error Analysis

105 views


Pages:
24
School:
Southern Methodist University
Course:
Acct 3311 - Intermediate Accounting I

Unformatted text preview:

CHAPTER 22 ACCOUNTING CHANGES AND ERROR ANALYSIS Sommers ACCT 3311 Discussion Questions Q22 12 How should consolidated financial statements be reported this year when statements of individual companies were presented last year Correction of Errors Types of Accounting Errors A change from an accounting principle that is not generally accepted to an accounting policy that is acceptable Mathematical mistakes Changes in estimates that occur because a company did not prepare the estimates in good faith Failure to accrue or defer certain expenses or revenues Misuse of facts Incorrect classification of a cost as an expense instead of an asset and vice versa Correction of Errors All material errors must be corrected Record corrections of errors from prior periods as an adjustment to the beginning balance of retained earnings in the current period Such corrections are called prior period adjustments For comparative statements a company should restate the prior statements affected to correct for the error Error Analysis Balance sheet errors affect only the presentation of an asset liability or stockholders equity account Current year error reclassify item to its proper position Prior year error restate the balance sheet of the prior year for comparative purposes Income Statement errors cause the improper classification of revenues or expenses Current year error reclassify item to its proper position Prior year error restate the income statement of the prior year for comparative purposes Counterbalancing Errors Will be offset or corrected over two periods If company has closed the books a If the error is already counterbalanced no entry is necessary b If the error is not yet counterbalanced make entry to adjust the present balance of retained earnings For comparative purposes restatement is necessary even if a correcting journal entry is not required If company has not closed the books a If error already counterbalanced make entry to correct the error in the current period and



View Full Document

Access the best Study Guides, Lecture Notes and Practice Exams

Loading Unlocking...
Login

Join to view Accounting Changes and Error Analysis and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view Accounting Changes and Error Analysis and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?