Correction of an Error in Financial Statements: Reporting and Tax Implications

The Correction of an Error in Financial Statements of a Prior-Period

Prev Question Next Question

Question

The correction of an error in the financial statements of a prior-period should be reported, net of applicable income taxes, in the current

Answers

A. none of these answers.

B. income statement after income from continuing operations and after extraordinary items.

C. income statement after income from continuing operations and before extraordinary items.

D. retained earnings statement after net income but before dividends.

E. retained earnings statement as an adjustment of the opening balance.

Show Answer

Explanations

Click on the arrows to vote for the correct answer

A. B. C. D. E.

Accounting rules require that prior-period adjustments due to a correction of an error cannot be reported on the current year income statement because they do not affect this year's operations. They are shown as an adjustment to the opening balance of retained earnings.

Prev Question Next Question