An example of the correction of an error in previously issued financial statements is a change
A) From the completed contract to the percentage-of-completion method of accounting for long-term construction-type contracts.
B) In the depletion rate, based on new engineering studies of recoverable mineral resources.
C) From the sum-of-years-digits to the straight-line method of depreciation for all plant assets.
D) From the installment basis of recording sales to the accrual basis, when collection of the sales price has been and continues to be reasonably assured

Question

Quizplus · Accepted Answer

Changing from the installment basis of recording sales to the accrual basis, when collection of the sales price has been and continues to be reasonably assured, corrects an error in the application of generally accepted accounting principles (GAAP). This adjustment reflects a correction of an error in how revenue was recognized in previously issued financial statements. Choices A, B, and C represent changes in accounting estimates or changes in accounting principle that are not treated as errors.

An Example of the Correction of an Error in Previously