The correction of a prior period error that had understated profit last year would:
A) include a credit to retained earnings.
B) increase current profit.
C) include a debit to retained earnings.
D) decrease current profit.

Question

Quizplus · Accepted Answer

The correction of a prior period error that understated profit would involve a credit to retained earnings to adjust for the previously understated profit, as retained earnings reflect cumulative profits and losses.

The Correction of a Prior Period Error That Had Understated