Choose the Correct Statement Regarding Accounting Changes

question 12

Multiple Choice

Choose the correct statement regarding accounting changes.

• A) All changes in accounting principle require a cumulative effect to be recognized in the income statement.
• B) Changing from FIFO to Weighted Average is a retrospective accounting principle change.
• C) Income statements numbers are required to be disclosed for most accounting principle changes.
• D) The amount of the correction for an error affecting previous earnings will be disclosed in current earnings.

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Definitions:

Residual Income

The income that remains after all personal debts and expenses have been paid, or in business, the net income after deducting cost of capital from operating profit.

Investment Center

A business segment within a company for which the manager has control and responsibility over cost, revenue, and investments.

Target Income

The specific amount of net income that a company aims to achieve for a certain period.

Investment Turnover

Investment turnover measures how efficiently a company generates sales from its investment in fixed assets.