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What is prior period adjustments ? How it is accounted in books ? Explain with examples .

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Question ajoutée par C S Raghunandan Chikkaballapur Rao , Freelancer : , Presently Working for : Brindavan Agencies,Kreations and Sreevamsa sales Organisation.
Date de publication: 2015/04/23
Frank Mwansa
par Frank Mwansa , ACCOUNTING LECTURER , FREELANCER

According to IAS8 Accounting policies, changes in accounting polices and errors, prior period adjustments are omissions from, and misstatements in , the entity's financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that:

         *   Was available when the financial statements for those periods were authorised for issue, and

         *    Could reasonably be expected to have been obtained and taken into account in the preparation and presentation of those financial statements.

  Examples include the effects of mathematical mistakes, mistakes in applying accounting policies bt the organisation, fraud by members of staff  and oversights or misinterpretation of  facts by employees in a company etc

 Accounting for prior period.

 Prior period adjustments are accounted for the financial statement retrospectively that is measurement and disclosure of amounts of elements of financial statements as if a prior period adjustment had never occurred.

RAJESH DESHKULKARNI GOPAL
par RAJESH DESHKULKARNI GOPAL , Group Accounts & Tax Manager , Confidential Group

Prior Period items usually adjusted in P&L Account

i.e. recognized as Prior Period Income or Expenses

Eg. Previous year Interest Income not recorded in our books of accounts

Then, same should be reported under P&L with note in Audit Report, this item shall be considered as in-admissible Income during Financial report year (current year)

Same treatment w.r.t. Expenses which are not recorded in previous year & reported during current year (Reporting year).

 

I hope that, above clarification along-with example clarifies your question.

Rajesh

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