Question

12) Accounting Errors Early in 20X2, three significant accounting errors were discovered. Two of the accounting errors were in regard to 20x1, and one error was in regard to 20x2. Unfortunately, the accounting process for 20X1 is complete, the books have been closed, and they cannot be re-opened. However, the books for 20X2 are open and all accounts are currently available for adjustment. Today's date is February 14, 20X2. Correct the following accounting errors, and be sure to use the appropriate date for your corrections. 1) Accounting error #1. Date of error: June 10, 20X1. A bookkeeper debited an incorrect account. Original entry as entered by the book keeper: June 10, 20x1 Advertising Expense Cash $ 25,000 25,000 Rather than Advertising Expense, the bookkeeper should have debited Delivery Expense.

Answer 1

Meaning-Prior period items

Prior period items are income or expenses which arises in the current period as a result of error or omission in the preparation of financial statement of one or more prior periods.   

Examples

1.Mathematical mistake

2.Misapplication of accounting policy (Revenue expenses recorded as capital expenditure or vice versa)

3.Oversight account entry.

Rectification entry in current period

Date	Particulars	Debit	Credit
14 Feb 2012	No rectification entry is required since there is no impact on retained earnings or same impact on retained earnings,however disclosure should be given in current year financial statement.
	(being advertisement expenses wrongly debited instead of delivery expenses in last year)
14 Feb 2012	Equipment A/c.............Dr	$62,000
	To Notes Payable		$55800
	To Retained Earnings		$6200
	(Being truck expenses wrongly debited instead of Equipment account now credited to retained earnings)
14 Feb 2012	Accounts Payable A/c.........Dr	$256
	Retained Earnings A/c..........Dr	$306
	To Cash		$562
	(Being delivery expenses wrongly debited by $256 instead of freight account $ 562 the difference debited to retained earnings and accounts payable $ 256 wrongly credited instead of cash $562)

Thank You.