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An example of a correction of an error in previously issued financial statements is a change:
a. from the FIFO method of inventory valuation to the LIFO method.
b. in the service life of plant assets, based on changes in the economic environment.
c. from the cash basis of accounting to the accrual basis of accounting.
d. in the tax assessment related to a prior period.

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An example of a correction of an error in previously issued financial statements is a change: c. from the cash basis of accounting to the accrual basis of accounting.

Which of the following represents a correction to a mistake in financial statements that have already been published?

 A switch from the cash basis to the accrual basis of accounting is an illustration of how to fix a mistake in financial statements that were previously published. Transactions that do not involve cash are not accounted for under the cash basis; nonetheless, they are included under the accrual basis.

Correcting an inaccuracy in financial statements that have already been published should be treated as a prior-period adjustment. As a result, such a mistake should be reported as an adjustment to the beginning balance of retained earnings in the year it is found.

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