A Company Made an Error in Recording the Year 1

question 149

True/False

A company made an error in recording the Year 1 purchase of computer equipment as an expense. This was discovered in Year 2. The item should be reported as a prior period adjustment on the Year 2 income statement.

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Definitions:

Break-even Point

The point at which total costs and total revenue are equal, meaning there is no net loss or gain, and the business is not making a profit.

Materials Cost

The expense associated with the raw materials and supplies used in the production of goods or services.

Labor

The work performed by individuals that contributes to the production of goods or services in an economy, often categorized as manual or skilled tasks.

Monthly Expenses

Regular costs incurred every month, such as rent, utilities, and groceries, necessary for maintaining a standard of living.