that there was a change in its products or manufacturing that cause them to be

That there was a change in its products or

This preview shows page 5 - 6 out of 6 pages.

that there was a change in its products or manufacturing that cause them to be slightly less profitable. The Generally Accepted Accounting Principles, GAAP, are the widely accepted accounting standards used by companies in the USA to prepare financial statements. A relatively new update to the standards is important to any company that leases or is a leasee. The new standard are leasers and leasees are required to recognize a ‘right-of-use’ asset and a lease liability for every lease they have. To follow this standard, Peyton Approved might have to adjust its balance sheet to show all of its liabilities. When an error is found while an accountant is revising financial statements, it is expected that they fix the error as soon as possible. There is a four-step process that the accountant will use. First, when the error is found, any previous years’ statements that were affect are restated to fix reflect the correction. Next, any current accounts with balances that are wrong will need to be updated with a journal entry. If retained earnings is one of the accounts affect, the beginning balance of either the Statement of Shareholders’ Equity or the Statement of Retained Earnings, whichever one being used, has a “prior period adjustment” reported on it. And lastly, a disclosure note will be needed to explain the error and what the impact of the error was.
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Resources Bragg, S. (2018, July 17). Prospective application. Retrieved from C Corps - Advantages and Disadvantages | CT Corporation. (n.d.). Retrieved from - disadvantages Hargrave, M. (2019, March 12). How Return on Equity Works. Retrieved from Kenton, W. (2019, March 12). Understanding Earnings Per Share (EPS). Retrieved from Kenton, W. (2019, April 04). Generally Accepted Accounting Principles (GAAP). Retrieved from Kenton, W. (2019, April 15). How the Current Ratio Works as a Liquidity Ratio. Retrieved from Wahlen, J.M., Jones, J.P., &Pagach, D.P. (2017). Intermediate accounting: Reporting and analysis (2nd ed.). Boston, MA: Cengage Learning
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