Which of the following, if discovered by James Company in the accounting period subsequent to the period of occurrence, requires the company to report the correction of an error?
A) The estimate of the useful life of a depreciable asset should have been revised.
B) A change from declining-balance depreciation method to straight-line method
C) Capitalization of an expense
D) Change in percentage of sales used for determining bad debt expense

Question

Quizplus · Accepted Answer

Capitalization of an expense is a type of accounting error that involves recording an expense as an asset. When this error is discovered in a subsequent period, it must be corrected and reported to ensure that the financial statements are accurate and reliable.

A, B, and D do not require reporting the correction of an error, as they involve changes in accounting estimates or policy choices rather than specific errors.

Which of the Following, If Discovered by James Company in the Accounting