When an Entity Changes Its Accounting from One Generally Accepted

question 18

Multiple Choice

When an entity changes its accounting from one generally accepted method to another generally accepted method:

• A) financial statements of all prior years are changed to maintain comparability.
• B) an explanatory note stating that the change was approved by the Financial Accounting Standards Board is required.
• C) the dollar effect of the change on both the balance sheet and income statement must be disclosed.
• D)changes like this are not permitted.

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Definitions:

FASB Financial Accounting Concepts

A framework of accounting standards and guidelines established by the Financial Accounting Standards Board to ensure uniformity and clarity in financial reporting.

Estimated Future Cash Flow

Projections of the amount of money expected to be generated or expended by a business in future periods.

Compound Interest Tables

Charts that indicate the amount of interest an investment will earn over time, factoring in the effect of compounding.

Equal Withdrawals

A term typically used in finance to describe a method of distributing assets or funds evenly over a set period of time.