A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to
A) beginning retained earnings for the earliest period presented.
B) net income for the period in which the change occurred.
C) comprehensive income for the earliest period presented.
D) stockholders' equity for the period in which the change occurred.

Question

Quizplus · Accepted Answer

A change in accounting principle requires retrospective application, which means the adjustment is made to the beginning balance of retained earnings for the earliest period presented. This adjustment reflects the cumulative effect of the change on prior periods. It is important to note that this adjustment does not affect the current period's net income.

A Change in Accounting Principle Requires That the Cumulative Effect