A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to:
A) Beginning retained earnings of the earliest period presented
B) Comprehensive income for the earliest period presented
C) Stockholders' equity of the period in which the change occurred
D) Net income of the period in which the change occurred

Question

Quizplus · Accepted Answer

A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to beginning retained earnings of the earliest period presented. This adjustment is made to account for the fact that the financial statements of earlier periods must be restated to reflect the change in principle. The adjustment is not made to comprehensive income, stockholders' equity, or net income of the period in which the change occurred.

A Change in Accounting Principle Requires That the Cumulative Effect