When a Change in Accounting Principle Occurs, The

question 10

Multiple Choice

When a change in accounting principle occurs, the:

• A) cumulative effect of the change should be reported in the current year's retained earnings statement.
• B) change should be reported retroactively.
• C) old accounting principle should be used for the current year.
• D) new accounting principle should be used starting in the current year, with no change to the prior years.

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Definitions:

Superego

In psychoanalytic theory, the part of the personality that represents internalized ideals, morals, and conscience, guiding behavior in accordance with societal norms.

Unconscious

A part of the mind that houses desires, memories, and thoughts not within the awareness of the conscious mind.

Rationally Directed

Actions or decisions guided by logical reasoning and systematic analysis of available information, as opposed to those based on emotion or intuition.

Secondary-Process Thinking

A mature type of thinking that operates within the boundaries of logic and reality, in contrast to primary-process thinking which is more primitive and pleasure-oriented.