A prior period adjustment is:

A A change in estimate

B A correction of an error in previously issued financial statements, reported as a restatement

C A change in policy

D An immaterial correction

✓ Correct Answer: Option B

Prior period adjustments restate previously reported financial statements to correct material errors. Adjust beginning retained earnings.

💡 Why is B) the correct answer?

The correct answer to the question "A prior period adjustment is:" is Option B: A correction of an error in previously issued financial statements, reported as a restatement.

The other options — A) A change in estimate, C) A change in policy, D) An immaterial correction — are incorrect for this CPA Exam Prep question. As explained above: Prior period adjustments restate previously reported financial statements to correct material errors. Adjust beginning retained earnings.

📚 About This CPA Exam Prep Practice Question

This 2-level CPA Exam Prep question from the Financial Accounting (FAR) topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CPA Exam Prep practice test or use flashcards for spaced repetition review.

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A prior period adjustment is:

✓ Correct Answer: Option B

📚 About This CPA Exam Prep Practice Question

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