An example of a prior period adjustment is recording

Question

Quizplus · Accepted Answer

Prior period adjustments are corrections of errors in previously issued financial statements. Recording a correction for depreciation expense that went unrecorded two years earlier directly corrects an error from a past period, fitting the definition of a prior period adjustment. Changes in estimates (like the useful life of an asset) and the recognition of liabilities for past actions (like a lawsuit) are accounted for in the current period, not as prior period adjustments. The sale of treasury stock is a current period transaction, not a correction of an error.

An Example of a Prior Period Adjustment Is Recording