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  • Prior Period Error Effect in The Current Period Adjustment

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    Jane
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    The document describes various prior period errors and their effects in the current period, along with the necessary adjusting journal entries. Specifically, it discusses how overstating or understating items like ending inventory, purchases, sales, expenses, and income in a prior period impacts beginning balances and net income in the current period. The adjustments ensure the financial statements are corrected by debiting and crediting the appropriate retained earnings, balance sheet, and income statement accounts.

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    Original Title

    PRIOR PERIOD ERROR

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    The document describes various prior period errors and their effects in the current period, along with the necessary adjusting journal entries. Specifically, it discusses how overstating or understating items like ending inventory, purchases, sales, expenses, and income in a prior period impacts beginning balances and net income in the current period. The adjustments ensure the financial statements are corrected by debiting and crediting the appropriate retained earnings, balance sheet, and income statement accounts.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    15 views2 pages

    Prior Period Error Effect in The Current Period Adjustment

    Uploaded by

    Jane
    The document describes various prior period errors and their effects in the current period, along with the necessary adjusting journal entries. Specifically, it discusses how overstating or understating items like ending inventory, purchases, sales, expenses, and income in a prior period impacts beginning balances and net income in the current period. The adjustments ensure the financial statements are corrected by debiting and crediting the appropriate retained earnings, balance sheet, and income statement accounts.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
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    PRIOR PERIOD ERROR EFFECT IN THE CURRENT ADJUSTMENT

    PERIOD
    Overstatement of Ending Beginning inventory overstated Dr. Retained Earnings
    Inventory COGS overstated Cr. Inventory, beg.
    - Understatement of Net income understated
    COGS
    - Overstatement of net
    income
    Understatement of Ending Beg. Inventory understated Dr. Inventory, beg.
    Inventory COGS understated Cr. Retained Earnings
    - Overstatement of COGS Net Income overstated
    - Understatement of net
    income
    Understatement of Purchases Purchases overstated Dr. Retained Earnings
    - Net income overstated COGS overstated Cr. Purchases.
    - COGS understated Net Income understated
    Overstatement of Purchases Purchases understated Dr. Purchases
    - Net Income Cr. Retained Earnings
    understated

    Overstatement of Purchases Net effect is ZERO on net


    And Ending Inventory income and Retained Earnings
    - Purchases overstated - Purchases understated
    - Inventory end. - Inventory beg.
    Overstated (net income Overstated
    overstated) - COGS overstated
    - Net income
    understated
    Understatement of sales Sales overstated Dr. Sales
    - Net income Cr. Retained Earnings
    understated
    Overstatement of Sales Sales understated Dr. Retained Earnings
    - Net Income overstated Cr. Sales
    Unrecorded or Failure to record Net Income overstated Dr. Expense account
    Prepaid Expense (Asset) Expense understated Cr. Retained Earnings
    - Net income
    understated
    - Expense overstated
    Failure to record accrued Expense overstated Dr. Retained Earnings
    expense (Liability) Net income understated Cr. Expense
    - Net income overstated
    - Expense understated
    Failure to record Deferred Net income understated Dr. Retained Earnings
    Income (Received not yet Income recognized understated Cr. Income
    rendered)
    - Net income overstated
    - Income recognized
    overstated
    Failure to record Accrued Income recognized overstated Dr. Income account
    Income Net income overstated Cr. Retained Earnings
    - Income recognized
    understated
    - Net income
    understated

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