Accounting Errors Flashcards
How do you calculate the remaining useful life when an asset’s life is revised?
When is a change in accounting principle recorded prospectively vs. retrospectively
Impact of inventory errors on COGS and Net income blueprint
How is the correction of a mathematical error in prior years’ depreciation recorded?
What are the types of accounting changes and their treatments
What is a change in accounting principle, and how is it treated
How are prior-period accounting errors corrected when comparative financial statements are issued or not issued?
Prior-Period Accounting Errors: Correction Methods
If Comparative Financial Statements Are Issued:
- Errors are corrected directly in prior-period financials as if the error never occurred.
- No impact on the current period’s retained earnings.
If No Comparative Financial Statements Are Issued:
- Errors are corrected via a cumulative adjustment to retained earnings (or AOCI) in the current period.
- Prior-period financials are not restated.
Key Point:
- Errors must be corrected properly; disclosure alone is insufficient.
What is a change in reporting entity, and how is it accounted for
How is a change in revenue recognition for long-term construction contracts from a point in time to over time accounted for?
What are the steps to adjust beginning retained earnings for a prior-period error involving over-expensed amounts? Say 60k was recognized lump sum when it should have been over a 3y period
How are changes in depreciation method and depreciation errors treated differently under U.S. GAAP?
How is the cumulative effect of a change from LIFO to FIFO reported in the financial statements under ASC 250?
How is the cumulative effect of changing inventory methods calculated and reported
How is a change in depreciation method reported in financial statements?
How are changes in warranty cost estimates treated in financial statements?
How does a change to the percentage-of-completion method affect financial statements
How is a change in accounting principle inseparable from a change in estimate reported, and why is separate disclosure incorrect
How is an accounting change handled when retrospective application is impracticable, and why are other treatments incorrect
How is an understated ending inventory error in prior financial statements corrected under GAAP
How is a change from LIFO to FIFO accounted for, and why are other treatments incorrect
How do beginning and ending inventory errors directly or indirectly affect Cost of Goods Sold (COGS)
How do beginning and ending inventory errors affect COGS example
How is a change in inventory valuation method (e.g., individual item to aggregate approach) reported, and why are other treatments incorrect
Are any affects reported as cumulative effects on the income statement?
Which of the following errors causes an overstatement of both current assets and stockholders’ equity?
A. Accrued Sales Expenses
B. Misclassifying a Noncurrent Note Receivable
C. Understatement of Depreciation
D. Misclassifying Holiday Pay as Manufacturing Overhead
Why are the other options incorrect?
How should indirect effects from a change in accounting principle be reported, and what are examples of indirect effects
What is a direct affect of a change in accounting principle?
Which of the following is considered a direct effect of a change in accounting principle?
A) Deferred taxes
B) Profit sharing
C) Royalty payments
D) None of the above
How is the cumulative effect of a change from the cash basis to the accrual basis reported
How are error corrections and cumulative effects of principle changes addressed, and how do they differ
A change in depreciation method is treated as a ___________, and adjustments are made ______________ starting in the year of change.
A change in depreciation method is treated as a change in estimate, and adjustments are made prospectively starting in the year of change.
Key differences between retrospective and retroactive
Change in principle and change in estimates.
