Which of the Following Statements Is TRUE About Prior Period

question 94

Multiple Choice

Which of the following statements is TRUE about prior period adjustments?

• A) Prior period adjustments require a complete restatement of prior year financial reports.
• B) Prior period adjustments are shown on the statement of retained earnings as corrections to the beginning balance.
• C) Prior period adjustments affect balance sheet accounts only, and must be included on single-step income statements.
• D) Prior period adjustments must be included as a separate line item on a multi-step income statement.

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Definitions:

Damages

Compensation claimed by or awarded to a party who has suffered loss, detriment, or injury, whether physical, financial, or reputational.

Civil Law

A legal system originating in Europe, codified into comprehensive statutes, rather than case law, to govern private sector disputes.

Restatements

Scholarly works published by the American Law Institute, offering a comprehensive summary of common law and its application in specific areas of law.

Common Law

The body of law developed through decisions of courts and similar tribunals (the judiciary), as opposed to laws made by the legislature (statutory laws) or by executive action (regulations).