A Prior Period Adjustment May Result in a Debit or Credit

question 98

True/False

A prior period adjustment may result in a debit or credit to a company's retained earnings account.

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Definitions:

Straight-Line Depreciation

A method of calculating the depreciation of an asset which spreads the cost evenly over its estimated useful life.

Useful Life

An estimate of the duration over which an asset is expected to be economically viable and operational in a business.

Average Rate of Return

A financial ratio showing the average annual return of an investment over its lifetime, calculated as the total expected return divided by the initial cost of the investment.

Total Income

The sum of all revenue and gains for an entity over a specified period of time.