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What is the accounting treatment of errors happened in previous year (after closing the prior year books)?

Accounting Accounting and Finance
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Question added by Rami Alqiq , Finance Manager , Dur Alkuttab Company Limited
Date Posted: 2016/10/19
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Maryl Sheina Ng
by Maryl Sheina Ng , Finance and Commercial Manager , Servita Consulting DMCC

If it involves correction of a P&L account/transaction, then adjustment to your RE should be done. But for Balance sheet, then you just need to do the adjusment in the related balance sheet account without affecting RE.

MARLON QUILANG ASUNCION
by MARLON QUILANG ASUNCION , Senior Accountant , Al Shouhra Trading Co., W.L.L. (Chalhoub Group)

Any errors from previous reporting period must be reported as Prior Period Adjustment booked as adjustment to Retained Earnings.

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