After the closing of its accounting books, Bear Company discovered that depreciation was understated by $8,000, which meant that Net Income was overstated by $8,000. What entry is needed to record the adjustment for the prior period's error?

Question

Quizplus · Accepted Answer

The error resulted in an overstatement of net income, which means that retained earnings were overstated. To correct this, we need to debit retained earnings to reduce it by the amount of the error. The corresponding credit is to accumulated depreciation, which will be increased by the amount of the error to reflect the correct depreciation expense.

After the Closing of Its Accounting Books, Bear Company Discovered