Are accounting changes permitted in financial statements?
Answer to Problem 21.1Q
Accounting changes are allowed in financial statements of company only up to a certain extent and must depict true and accurate financial position of the company.
Explanation of Solution
Accounting Change:
Accounting change includes the change in accounting method, accounting principle or standard. It is the change in the method of calculation of profit and loss statement of company. For example: A company changes its method from effective interest rate method to straight line method this is called the Accounting change.
- Accounting change is permitted but only up to a certain extent and these changes must be justified to the management of company.
- These changes must depict true and accurate financial position of the company.
- These changes should be disclosed to the users, investors, authorities so that they can compare and analyze the financial statement of company.
- Also, Changes are in limit not reoccurring every time.
Hence, accounting change ispermitted in financial statements.
Want to see more full solutions like this?
Chapter 21 Solutions
Intermediate Accounting
Additional Business Textbook Solutions
Principles of Accounting Volume 1
Advanced Financial Accounting
Intermediate Accounting
Financial Accounting: Tools for Business Decision Making, 8th Edition
Fundamentals of Cost Accounting
Managerial Accounting (4th Edition)
- Does the order in which financial statements are prepared matter?arrow_forwardWhat accounting policies are disclosed in the notes accompanying a companys financial statements? Why is this disclosure important?arrow_forwardWhat is the purpose of the Income Summary account? How does it relate to the revenue and expense accounts?arrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengagePrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College