💰 CPA Exam Prep

What is a "prior period adjustment"?

A A budgeting tool
B A correction of an error in previously issued financial statements
C A forecast
D A type of revenue

✓ Correct Answer: Option B

Prior period adjustments correct errors in earlier financial statements and are reported as adjustments to beginning retained earnings.

💡 Why is B) the correct answer?

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

The other options — A) A budgeting tool, C) A forecast, D) A type of revenue — are incorrect for this CPA Exam Prep question. As explained above: Prior period adjustments correct errors in earlier financial statements and are reported as adjustments to beginning retained earnings.

📚 About This CPA Exam Prep Practice Question

This 3-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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