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- Where a change in accounting estimates occurs, which of the following should be disclosed? A. The nature of the change and the impact on previous income statements The fact that the amount of the effect on future periods will not be disclosed because B. estimating that amount is impracticable and the reason for the change and comparative data to show the impact with and without the change The fact that the amount of the effect on future C. periods will not be disclosed because estimating that amount is impracticable D. The reason for the change and comparative data to show the effect with and without the change5. The following items affect the retained earnings account, except Group of answer choices a. net income or loss for the period b. prior period errors c. realization of revaluation surplus d. effect of change in accounting estimateWhich of the following is not a characteristic of non-counterbalancing error? a. If not detected, this is not automatically corrected in the next accounting period. b. The income statement of the period in which the non-counterbalancing error is committed is misstated. c. The statement of financial position of the year of non-counterbalancing error and succeeding statement of financial position are incorrect until the error is corrected. d. If the net income of one year is understated due to non-counterbalancing error, the net income of subsequent year is also affected.
- Which of the following statements regarding accounting change is correct? a. Change in depreciation method is accounted for as a change in accounting policy. b. Change in accounting estimate is accounted for in current and future periods. c. The categories of accounting changes are change in accounting estimate and correction of prior period error. d. A switch from the direct write-off method to the allowance method of accounting for bad debts is an example of change in accounting policy.The change in accounting estimate should be treated currently and prospectively. True or falseWhich of the following statements about a change in accounting estimate is not true? A. A change in accounting estimate can only be made when it is required to comply with an accounting standard or interpretation. B. Changes in accounting estimates result from new information or new developments. C. The effects of a change in accounting estimate should be applied prospectively. D. A change in estimate is an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset.
- The effect of a revision of an accounting estimate must be recognised in profit and loss in which reporting periods? In the present, prior (by adjusting retained earnings) and future periods affected. In the present and future periods affected. In the present and prior reporting periods (by adjusting retained earnings). Not recognised in any period.Which of the statements below is false? If the net income of prior period is overstated because of the change in accounting policy, the effect is (A) deducted from the beginning retained earnings. Prior period errors are shown as adjustment of the ending balance of retained earnings. If the net income of (B) the prior period is overstated, the amount of the error uis deducted from retained earnings. Equity is also the net assets. In the conversion of preference chares into ordinary shares, if the total par or stated value of the ordinary D shares is more than the original issue of the preference shares, the difference is charged to retained earnings.If the income statement error is discovered in a subsequent accounting period, what action is to be done by the entity? Group of answer choices a. Reclassify the item to its proper nominal account and restate the income statement of the prior year affected by the error. b. Restate the income statement of the prior year affected by the error. c. No reclassifying entry is necessary but restate the income statement of the prior year affected by the error. d. Reclassify the item to its proper nominal account. Recording of next year's sales as sales of the current year will Group of answer choices a. overstate net income of next year b. not affect retained earnings at the end of next year c. understate retained earnings at the end of the current year d. understate net income of the current year
- If it is impracticable to determine the cumulative effect of an accounting change to any of the prior periods, the accounting change should be accounted for a. as a cumulative effect change on the income statement b. as a prior period adjustment c. on a prospective basis d. as an adjustment to retained earningsUsing IFRS, how should prior period errors that are discovered in a subsequent reporting period be recognized in the financial statements? a. As an adjustment to beginning retained earnings for the reporting period in which the error was discovered. b. As a note in the financial statements that the error was previously made but has since been corrected. c. In the current period if it’s not considered practicable to report it retrospectively. d. In the statement of comprehensive income.Why should the beginning retained earnings be adjusted for prior period errors and effects of change in accounting policy?