How can adjustments to the standardized financial statements be made in order to undo these distortions? Accounting distortions: Accounting distortions refer to the concept of any sort of difference between the information or evaluation made regarding the financial statement than the real-time data of the business.The most common types of accounting distortions are as follows:Data entry errors: It occurs when there are mistakes or misstatements in the data entry system of the company. For example, entering items in the wrong account, transposing numbers, leaving out or adding a digit or a decimal place, treating expenses as income, or vice versa.The error of omission: It involves an error that occurs when one fails or forgets to make any entry. For example, failure to record any notes received.The error of commission: It involves mishandling of any entry by recording it in the wrong books or with the wrong placeThe error of transposition: It is the error of recording the wrong amount either by exchanging the entries or amount of any digits of it.Compensating errors: It is the error in which one error offsets the other.Duplication errors: It involves the error when one item or figure amount is duplicated more than once in the books of accounts.The error of principle: It involves an error when the recorded item does not relies on the norms of Generally Accepted Accounting Principles (GAAP)The error of entry reversal: It implies an occurrence of an error when an expense is either treated as income or vice versa which will manipulate the final results.

Accounting distortions are differences between the data shown in financial statements and actual…

Answered: How can adjustments to the standardized…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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How can adjustments to the standardized financial statements be made in order to undo these distortions?

Accounting distortions:

Accounting distortions refer to the concept of any sort of difference between the information or evaluation made regarding the financial statement than the real-time data of the business.

The most common types of accounting distortions are as follows:

Data entry errors: It occurs when there are mistakes or misstatements in the data entry system of the company. For example, entering items in the wrong account, transposing numbers, leaving out or adding a digit or a decimal place, treating expenses as income, or vice versa.
The error of omission: It involves an error that occurs when one fails or forgets to make any entry. For example, failure to record any notes received.
The error of commission: It involves mishandling of any entry by recording it in the wrong books or with the wrong place
The error of transposition: It is the error of recording the wrong amount either by exchanging the entries or amount of any digits of it.
Compensating errors: It is the error in which one error offsets the other.
Duplication errors: It involves the error when one item or figure amount is duplicated more than once in the books of accounts.
The error of principle: It involves an error when the recorded item does not relies on the norms of Generally Accepted Accounting Principles (GAAP)
The error of entry reversal: It implies an occurrence of an error when an expense is either treated as income or vice versa which will manipulate the final results.

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