Analyzing the effect of prior-period adjustments Taylor Corporation discovered in 2019 that it had incorrectly recorded in 2018 a cash payment of $70,000 for utilities expense. The correct amount of the utilities expense was $35,000. Requirements Determine the effect of the error on the accounting equation in 2018. How should this error be reported in the 2019 financial statements?
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Analyzing the effect of prior-period adjustments
Taylor Corporation discovered in 2019 that it had incorrectly recorded in 2018 a cash payment of $70,000 for utilities expense. The correct amount of the utilities expense was $35,000.
Requirements
- Determine the effect of the error on the
accounting equation in 2018. - How should this error be reported in the 2019 financial statements?
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