Question

When are correcting entries made?

1) At the end of an accounting period
2) Anytime an error is discovered
3) Only when the error is significant
4) Only when the error affects financial statements

Answer 1

Correcting entries are made anytime an error is discovered that affects the accuracy of financial statements, not just at the end of an accounting period or when the error is significant. These entries are crucial for maintaining accurate financial records for decision-making.

Step-by-step explanation:

Correcting entries are made anytime an error is discovered that affects the accuracy of the financial statements. These entries are necessary to ensure that financial statements are accurate, which is crucial for decision-making purposes. Errors may be discovered after the financial statements have been issued, or during an audit, requiring adjustments to the financial records.

Although correcting entries can be made at any time, it is not uncommon for them to be made at the end of an accounting period during the adjustment process. The significance of an error is subjective, and whether a correction should be made may depend on its materiality and its impact on decision-making.