How to Account for a Change in Accounting Estimate

This video shows how to account for a change in accounting estimate. When a company changes an accounting estimate, such as the expected salvage value for equipment, the company accounts for the change prospectively. This means the company does not restate the financials of prior periods; instead, the company simply begins using the new estimate in the current period and in future periods.-
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[@pabiradebe4839]

You made it so easy, thank you.

[@campbellblk7484]

That makes perfect sense. Thanks!

[@poojasriram4419]

THANK YOU

[@karentv1087]

THAAANKS!

[@Devansh_Gulabwani_]

You are a great teacher , keep up the good work

[@Edspira]

Thank you! 😃

[@shumingoh8336]

What about if a supplier invoices us in the previous financial year and only issues the credit note in the following year? should we be adjusting the retained earnings or expenses account? Please help!!

[@Edspira]

Let's assume that your company uses a calendar year and receives a utility bill for $100 on December 31. Then on January 15, your company receives a credit note for $30 due to a mistake. The journal entry for December 31 would be to debit Utilities Expense for $100 and credit Utilities Payable for $100. The journal entry for January 15 would be to debit Utilities Payable for $30 and credit Utilities Expense for $30 (if your company has already closed its books for the previous fiscal year, this would affect the new fiscal year; but if your company hasn't yet closed its books, the expense reduction can be applied to the previous fiscal year).

[@barah1124]

Change in estimated lives of depreciable assets? Yas or no