DISCUSSION QUESTIONS 1-1

#1

Reclassifying Entry: entry made to reclassify

previously debited or credited accounts.

Correcting Entry: entries to correct errors made in

recording transactions.

Adjusting Entry: entry made at the end of an

accounting period to ensure that the income
recognition and matching principles are followed.

#2

Books still open: means that closing entries

were not yet made. Adjustments for the year can
still be done.

Books already closed: means that closing

entries were already made. Adjustments for the
year can only be done on the books of the
succeeding year.
EFFECTS

Reclassifying
Entry
Correcting Entry
Adjusting Entry

BOOK STILL OPEN BOOKS ALREADY CLOSED

Corrected
Corrected thru
Nominal Accounts
Corrected thru
Nominal Accounts

No Effect/ Adjusted thru

Retained Earnings
Adjusted thru
Retained Earnings
Adjusted thru
Retained Earnings

#3

Prior Period Errors are omissions from and

misstatements in the entitys financial statements
for one or more periods arising from a failure to use
or misuse of reliable information.

Treatment
An entity shall correct material prior period errors
retrospectively in the first set of financial statements
authorized for issue after their discovery by:
Restating comparative amounts.
Restating the opening balance of assets,
liabilities, and equity.

#3

Examples
Notes Receivable is debited instead of trading
securities.
Accrued salaries expense was not recorded.

#4

Counterbalancing errors errors which, if not

detected, are automatically counterbalanced or
corrected in the next accounting period.

Examples:
Overstatement

of ending inventory
Understatement of purchases

#4

Non-counterbalancing errors errors which, if

not detected, are not automatically
counterbalanced or corrected in the next
accounting period.

Examples:
Sales

not recorded.
Misstatement of depreciation