Asked by Andres Velazquez on Apr 25, 2024
Verified
A change in an accounting estimate is:
A) Reflected in past financial statements.
B) Reflected in future financial statements and also requires modification of past statements.
C) Reflected in current and future years' financial statements,not in prior statements.
D) Not allowed under current accounting rules.
E) Considered an error in the financial statements.
Accounting Estimate
An approximation of a financial statement element, item, or account in the absence of exact data, often involving judgment or assumptions.
Financial Statements
Formal records of the financial activities and position of a business, individual, or other entity.
- Identify and apply changes in accounting estimates and their effects on financial statements.
Verified Answer
MA
Mubarak Alotaibi7 days ago
Final Answer :
C
Explanation :
A change in accounting estimate is reflected in current and future years' financial statements but not in prior statements. This is because estimates are made based on the best information available at the time and may change in the future as new information emerges or circumstances change. Therefore, past financial statements cannot be modified to reflect the new estimate, but the change will be accounted for in the current and future periods.
Learning Objectives
- Identify and apply changes in accounting estimates and their effects on financial statements.