When There Has Been a Change in Accounting Principle

question 55

Multiple Choice

When there has been a change in accounting principle,

• A)the old principle should be used in reporting the results of operations for the current year.
• B)the cumulative effect of the change should be reported in the current year's retained earnings statement.
• C)the change should be reported retroactively.
• D)the new principle should be used in reporting the results of operations of the current year, but there is no change to prior years.

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Definitions:

Reasonable Belief

A person's honest conviction or acceptance that a fact or condition is true, based on factual evidence or credible information.

Authority of the Principal

The legal right or power given to an agent to act on behalf of a principal in business transactions.

Estoppel

A legal principle that prevents a person from arguing something contrary to a claim or a fact that has been previously established as the truth.

Apparent Authority

A form of authority that a third party reasonably believes an agent has due to the actions of the principal, even if the agent does not have actual authority.