Can someone explain “correction of prior period errors” (accounting question)?
Generally accepted accounting principles dictate that error corrections (if material) must be handled by “prior period adjustment.” This means that the financial statements of prior periods must be subjected to a restatement to make them correct — in essence the financial statement of prior periods are redone to reflect the correct amounts. Correcting financial statements of prior periods entails reissuing financial statements with the necessary corrections. Pls refer to the example at the link for journal entries.
