The correction of a prior period error in which the cost of goods sold was understated would require which of the following?
A) debit to Cost of Goods Sold
B) credit to Cost of Goods Sold
C) debit to Retained Earnings
D) credit to Retained Earnings

Question

Quizplus · Accepted Answer

DPrior period errors are corrected by adjusting the opening balance of retained earnings. This means if the cost of goods sold was understated, it would require a debit to retained earnings to increase the expense (correcting the understatement), and a credit to retained earnings if the correction was to decrease an expense or increase income, adjusting for the error in the opposite direction.

The Correction of a Prior Period Error in Which the Cost