Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Retained Earnings: Prior Period Adjustments

Financial Accounting

12. Stockholders' Equity

Retained Earnings: Prior Period Adjustments

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Multiple Choice

Prior period adjustments are reported in the:

Statement of Cash Flows

Income Statement

Statement of Retained Earnings

Notes to the Financial Statements only

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Verified step by step guidance

Understand the concept of prior period adjustments: These are corrections of errors or changes in accounting principles that affect the financial statements of previous periods.

Recognize where prior period adjustments are reported: They are not part of the Statement of Cash Flows or Income Statement because they do not directly relate to current period operations or cash flows.

Learn that prior period adjustments are included in the Statement of Retained Earnings: This is because they impact the beginning balance of retained earnings, reflecting corrections to prior periods.

Note that prior period adjustments may also be disclosed in the Notes to the Financial Statements: This provides additional context and explanation for the adjustments made.

Understand the importance of transparency: Reporting prior period adjustments in the Statement of Retained Earnings ensures that users of financial statements are aware of changes affecting the equity section of the balance sheet.