A Prior Period Adjustment Should Be Reflected, Net of Applicable

question 1

Multiple Choice

A prior period adjustment should be reflected, net of applicable income taxes, in the financial statements of a business entity in the

• A) Retained earnings statement after net income but before dividends
• B) Retained earnings statement as an adjustment of the opening balance
• C) Income statement after income from continuing operations
• D) Income statement as part of income from continuing operations

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Definitions:

Purchase Discounts

Reductions in the price of goods purchased, usually as a reward for early payment to the supplier.

Freight-In

The cost associated with getting inventory to a business, usually included in the cost of goods sold.

GAAP

The collection of standard accounting practices widely recognized for financial reporting is called Generally Accepted Accounting Principles.

Perpetual System

A system for managing inventory accounts that instantly logs inventory sales or acquisitions using computerized point-of-sale systems and software for enterprise asset management.