When a Company Changes from One Acceptable Accounting Method to Another

question 89

Multiple Choice

When a company changes from one acceptable accounting method to another, the change is reported

• A) in the statement of retained earnings, as a correction to the beginning balance.
• B) in the income statement, below income from continuing operations.
• C) in the income statement, above income from continuing operations
• D) through a retroactive restatement of prior period earnings.

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Definitions:

Fixed Cost

Costs that remain constant and do not vary with the level of business activity, including expenses like rent, salaries, and insurance.

Variable Cost

Expenses that change in proportion to the production output or sales of a company, such as raw materials and labor costs.

Measure Of Activity

A metric used to quantify the level of production or the volume of operations in a business.

Horizontal Analysis

A side-by-side comparison of two or more years’ financial statements.