When There Has Been a Change in Accounting Principle

question 199

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 un reporting the results of operations of the current year, but there is no change to prior years.

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Definitions:

Credit Sales

Transactions where the customer is allowed to purchase goods or services and pay for them at a later date.

Cash Received

The actual inflow of cash into a business from various sources, including operations, financing activities, and investing activities.

Total Sales

The aggregate revenue generated from all sales activities before any deductions are made.

Credit Sales

Sales made by a business where payment is delayed and allowed on credit.