A company made an error in recording the 2009 purchase of computer equipment as an expense. This was discovered in 2011. The item should be reported as a prior period adjustment on the 2009 income statement.

Question

Quizplus · Accepted Answer

The correction of the error should be applied retrospectively to the financial statements, which means adjusting the opening balances of assets, liabilities, and equity for the earliest period presented, not by adjusting the 2009 income statement directly in 2011.

A Company Made an Error in Recording the 2009 Purchase