A prior period adjustment for understatement of profit
A) will be credited to the Retained Earnings account.
B) will be debited to the Retained Earnings account.
C) will show as a gain on the current year's Income Statement.
D) will show as an asset on the current year's Balance Sheet.

Question

Quizplus · Accepted Answer

A prior period adjustment for understatement of profit is corrected by crediting the Retained Earnings account to increase it, reflecting the corrected higher profit retained in the business from previous periods.

A Prior Period Adjustment for Understatement of Profit