BU397 Chapter Notes - Chapter 21: Balance Sheet, Income Statement, Financial Statement
Document Summary
Includes: change from an accounting policy that is not acceptable to one that is, mathematic mistakes, omission due to oversight, previous estimates were not prepared in good faith, recognition of an error, misappropriation of assets. Current method: new accounting method or estimate"s cumulative effect on the financial statement at the beginning of the period is calculated, an adjustment is reported in current year"s income statement, py"s fs aren"t restated, seen as a catch up . As if the new method had always been used or error correction never happened: an adjustment is made to the financial statements equal to this cumulative effect through retained earnings, results in restating all presented comparative affected financial statements on a basis consistent with the newly adopted policy. Balance sheet errors: affect only the presentation of an asset, liability, or shareholders equity, reclassify when error is discovered, if there are comparatives, balance sheet for error year is restated correctly, no further corrections are requires.
