Prior-period adjustments are:

Question

Quizplus · Accepted Answer

Prior-period adjustments are corrections made to the financial statements of a prior period due to errors in that period's financial reporting. These adjustments are reflected in the beginning balance of retained earnings in the period in which they are discovered. The adjustment can be added to or deducted from the beginning balance of retained earnings depending on whether it increases or decreases the previous period's reported earnings. Therefore, the correct choice is B (added to or deducted from the beginning balance of retained earnings).

Prior-Period Adjustments Are