Question

How are prior-period errors affecting profits usually rectified if found in the next accounting year?

Options

• By direct correction in the ledger

• By posting to Suspense Account

• By adjusting through Profit & Loss Adjustment Account

• By making an offsetting entry

Answer 1

By adjusting through Profit & Loss Adjustment Account

Explanation:

Prior-period errors are corrected in the following year through an adjustment account that affects profits or balances as needed.