Retained Earnings: Prior Period Adjustments definitions Flashcards
Retained Earnings: Prior Period Adjustments definitions
You can tap to flip the card.
Control buttons has been changed to "navigation" mode.
1/15Skip to main content
Retained Earnings Equity account reflecting cumulative net income minus dividends, adjusted for prior period errors or changes in accounting principles. Prior Period Adjustment Correction made to the beginning balance of equity to fix errors or reflect changes in accounting principles from previous periods. Error Mistake in financial records, such as unrecorded expenses or revenues, requiring correction to ensure accurate financial statements. Change in Accounting Principle Switch in methods or rules used for financial reporting, often involving inventory costing, to improve comparability across periods. Cumulative Effect Total impact on financial statements from correcting an error or changing a principle, applied to the beginning balance of equity. Debit Entry on the left side of an account, used to decrease equity or increase assets, such as reducing retained earnings for prior expenses. Credit Entry on the right side of an account, used to increase equity or decrease assets, such as increasing retained earnings for prior revenues. Prepaid Expenses Assets representing payments made in advance for services or goods, which may require adjustment if misclassified. Inventory Current asset representing goods held for sale, whose valuation can change with different costing methods or corrections. FIFO Inventory costing method assuming earliest goods purchased are sold first, affecting reported inventory and cost of goods sold. LIFO Inventory costing method assuming latest goods purchased are sold first, impacting inventory and expense figures. Weighted Average Method Inventory valuation approach averaging costs of all units available for sale, influencing both inventory and cost of goods sold. Cost of Goods Sold Expense representing the direct costs of producing goods sold during a period, affected by inventory accounting methods. Comparability Quality of financial information that allows users to identify similarities and differences across periods or entities. Net Income Profit remaining after all expenses are deducted from revenues, forming the basis for changes in retained earnings.
05:24
