Solution 1 2nd Flr GF Partners Bldg 139 H dela Costa Salcedo Village Makati City AUDITING PROBLEMS Accounting for Changes and Correction of Errors Prof
Solution nd Flr GF Partners Bldg H dela Costa Salcedo Village Makati City AUDITING PROBLEMS Accounting for Changes
Solution nd Flr GF Partners Bldg H dela Costa Salcedo Village Makati City
Partners Bldg H dela Costa Salcedo Village Makati City AUDITING PROBLEMS Accounting for Changes and Correction of Errors Prof
Solution nd Flr GF Partners Bldg H dela Costa Salcedo Village
Makati City AUDITING PROBLEMS Accounting for Changes and Correction of Errors Prof
Solution nd Flr GF Partners Bldg H dela Costa
Solution nd Flr GF
(Solution) 1 2nd Flr, GF Partners Bldg, 139 H. dela Costa, Salcedo Village, Makati City AUDITING PROBLEMS Accounting for Changes and Correction of Errors Prof....

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I have two questions with problem6 with attached files1. prepare the compound entry to correct the books at the end of 2004, assuming the books are closed.2. prepare the compound entry to correct the books at the end of 2004, assuming the books are still open.2 nd Flr, GF Partners Bldg, 139 H.V. dela Costa, Salcedo Village, Makati City AUDITING PROBLEMS Accounting for Changes and Correction of Errors Prof. L.O. Aristorenas __ DeFnition of Terms ? Accounting policies - speciFc principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting the Fnancial statements. ? ±undamental errors - are errors discovered in the current period with such signiFcance, that the Fnancial statements of one or more prior periods can no longer be considered to have been reliable at the date of their issue. Reasons why Accounting Changes Occur : 1. The accounting profession may mandate that a new accounting principle is to be used. 2. Changing economic conditions 3. Changes in technology and in operations 4. New experience or new information may prompt companies to change its estimate of revenues or expenses. TYPES O± ACCOUNTING CHANGES 1. Change in Accounting Principles This is a change from one generally accepted accounting principle to another generally accepted accounting principle. Adoption of a new principle in recognition of events that have occurred for the 1st time is not a change in accounting principle. There is no change in accounting principle when the depreciation method adopted for a newly acquired asset is di±erent from the method or methods used for previously recorded assets of similar class. A change from a principle that is not generally accepted to one that is generally accepted is considered to be an error correction than a change in accounting principle. Accounting Procedure: Benchmark treatment A change in accounting policy/principle should be applied retroactively unless the amount of any resulting adjustment that relates to prior periods is not reasonably determinable. Any resulting adjustment should be reported as an adjustment to the opening balance of the retained earnings. Comparative information should be restated unless it is impracticable to do so. 2. Change in Accounting Estimate This is a change that occur as a result of new information or acquisition of additional experience. Changes in estimates are viewed as normal recurring corrections and adjustments or the natural result of the accounting process. Retroactive treatment is prohibited. Accounting Procedure: a. Report current and future Fnancial statements on the new basis. 1

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