What Are Prior Period Adjustments - Definition And Meaning In Accounting
Prior Period Adjustments means those Adjustments which are made to correct the prior accounting period’s errors or mistakes made due to the some different reasons i.e., human mistakes such as undercasting, overcasting, wrongly posted, Treating Capital Expenditure As Revenue Expenditure , etc., changes in the standards and other reasons. For Example, if the company treats the Capital Expenditure of Rs. 5000 as Revenue Expenditure , then it is added back to the previous year Retained Earning by Rs. 5000 under statement of retained Earnings. The Adjusted Entry is credited the Retained Earnings account and debited the revenue expenditure account as shown below: Revenue Expenditure a/c 5000 ...