When the Amount of Annual Depreciation Is Revised Because of a Change

question 230

True/False

When the amount of annual depreciation is revised because of a change in the estimated useful life of an asset,prior years' financial statements should be restated.

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Definitions:

Reversing Entry

An accounting technique that negates the impact of the previous entry, often used to simplify bookkeeping for accruals and deferrals.

Depreciation

The process of allocating the cost of a tangible asset over its useful life to account for the loss of value over time.

Accrual

The accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash is actually received or paid.

Prepaid Rent

An asset account that represents rent payments made in advance of the rental period to which they relate.