When an Accounting Change Is Reported Under the Retrospective Approach

question 80

Multiple Choice

When an accounting change is reported under the retrospective approach, prior years' financial statements are:

• A) Revised to reflect the use of the new principle.
• B) Reported as previously prepared.
• C) Left unchanged.
• D) Adjusted using prior period adjustment procedures.

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Definitions:

Accounts Receivable

Payments yet to be received by a company from customers for goods or services already provided.

Notes Payable

Financial obligations represented by written promissory notes that specify the terms under which a borrower agrees to repay a lender.

Owner's Capital

Represents the total equity of the owner in a business, which consists of the initial and additional investments minus any withdrawals.

18-Month Insurance

This term refers to a prepaid insurance policy that covers a period of 18 months, recognized as an asset initially and expensed over the duration of the coverage.