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Sec. 42. Errors. Errors can arise in respect of the recognition, measurement,
presentation, or disclosure of elements of financial statements. Errors include the effects of
mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations
of facts, and fraud. Financial statements do not comply with PPSASs if they contain either
material errors, or immaterial errors made intentionally to achieve a particular presentation of an
entitys Statement of Financial Position, Statement of Financial Performance, or Statement of
Cash Flows.
a. Errors may be classified as current period errors and prior period errors.
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1. Current period errors are errors committed and discovered within the same
period. It shall be corrected by an adjusting entry, within the same year before
the financial statements are authorized for issue.
2. Prior period errors are omissions from, and misstatements in, the entities
financial statements for one or more prior periods arising from failure to use, or
misuse of reliable information that:
i. was available when financial statements for those periods were authorized for
issue; and
ii. could reasonably be expected to have been obtained and taken into account in
the preparation and presentation of those financial statements.
b. An entity shall correct material prior period errors retrospectively in the first set of
Sec. 44. Disclosure of Prior Period Errors. An entity shall disclose the following:
a. the nature of the prior period error;
b. for each prior period presented, to the extent practicable, the amount of the correction
for each financial statements line item affected;
c. the amount of the correction at the beginning of the earliest prior period presented;
and
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d. if retrospective restatement is impracticable for a particular prior period, the
circumstances that led to the existence of that condition and a description of how and
from when the error has been corrected.
Financial statements of subsequent periods need not repeat these disclosures. (Par. 54,
PPSAS 3)
a. Before adjustment
Particular 2015 2014
Revenue P 50,000,000 P 40,500,000
Other Operating Revenue 20,100,000 18,000,000
Total Revenue 70,100,000 58,500,000
Expenses (55,000,000) (45,000,000)
Surplus P 15,100,000 P 13,500,000
Entity ABC
Statement of Changes in Net Assets/Equity
Particular 2015 2014
Opening accumulated surpluses P 103,500,000 P 90,000,000
Surplus for the period 15,100,000 13,500,000
c. After adjustment
Particular 2015 2014 As Restated
Revenue P 50,000,000 P 46,700,000
Other Operating Revenue 20,100,000 18,000,000
Total Revenue 70,100,000 64,700,000
Expenses (55,000,000) (45,000,000)
Surplus P 15,100,000 P 19,700,000
d. Notice that the Revenue, Total Revenue and the Surplus figures presented in 2014 are
already the adjusted amounts. Statement of Changes in Net Assets/Equity are as
follows:
Entity ABC
Statement of Changes in Net Assets/Equity
Particular 2015 2014 As Restated
Opening Accumulated Surplus/(Deficit) as
previously reported
P 103,500,000 P 90,000,000
Correction of error 6,200,000 Opening Accumulated Surplus/(Deficit) as
restated 109,700,000 90,000,000
Surplus for the period 15,100,000 19,700,000
Closing Accumulated Surplus/(Deficit) P 124,800,000 P 109,700,000
e. Surplus for the period for 2014 are already adjusted, while the opening Accumulated
Surpluses in 2015 is restated.
Sec. 47. Preparation and Submission of Other Reports. In addition to the set of
financial statements enumerated in Section 5 of this Chapter, the following reports/
schedules/statements shall be submitted to GAS, COA:
a. Pre-Closing Trial Balances
b. Post-Closing
c. Other schedules
1. Regional Breakdown of Income
2. Regional Breakdown of Expenses
Sec. 48. Trial Balance. Trial Balance (TB) is a list of all the GL accounts and their
balances at a given time. The accounts are listed in the order in which they appear in the RCA,
with the debit balances in the left column and the credit balances in the right column.
a. The TB shows the equality of debit and credit balances of all GL accounts as at a
given period. It is prepared and submitted monthly, quarterly and annually. At the
end of the fiscal year, the pre-closing and the post-closing trial balances shall be
prepared.
b. The TB is prepared to:
1. Prove the mathematical equality of the debits and credits after posting;
2. Check the accuracy of the postings;
Sec. 50. Adjusting Journal Entries. Adjusting journal entries are made at the end of an
accounting period to allocate revenue and expenses to the period in which they actually occurred.
AJEs are required every time a financial statement is prepared to make the statement truly
reflective of the financial condition of the entity at a given period. Adjustments are of two main
types:
a. Accrued items
b. Deferred items