A Friend Comes to You with a Set of Financial

question 54

Essay

A friend comes to you with a set of financial statements that he thinks contains an error.The footnotes contain a note on a bond issue sold after the end of the reporting period.Your friend is sure this is an error because the transaction occurred after the cutoff date for the financial statements.
Required:
Explain to your friend why certain items that occur after the end of an accounting period are included in the financial statements and the manner in which they can be disclosed.

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Definitions:

Centerline

In the context of statistical process control charts, this is the median line around which the plotted values are expected to vary.

Random Variation

The natural fluctuation in data or process outcomes, occurring without a specific, predictable cause.

Sample Proportion

The ratio of the number of times an event occurs to the total number of observations or trials in the sample.

Standard Error

Standard error measures the accuracy with which a sample distribution represents a population by quantifying the variability of the sample mean.