When an Income Statement Error That Does Not Affect the Balance

question 60

Multiple Choice

When an income statement error that does not affect the balance sheet is not found until after the books are closed, an entry ________.

• A) must be made to correct the error during the next year
• B) must be made to correct the error by reopening the books
• C) is not necessary, but financial statements must be recalled immediately
• D) is not necessary, but the income statement must be corrected before issue

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Definitions:

Underapplied Overhead

A situation where the allocated manufacturing overhead cost is less than the actual overhead cost incurred.

Job Costing

A cost accounting system that accumulates costs for each individual job or project separately.

Process Costing

Process costing is an accounting method used to allocate the costs of production to units of product, particularly suitable for manufacturing processes that are continuous or produce homogeneous products.

Cost of Products

The total expenditure incurred to bring a product to the market, including production, labor, and material costs.