discuss with examples, the nature of a reclassificationadjustment and the arguments for and against...

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Accounting

discuss with examples, the nature of a reclassificationadjustment and the arguments for and against allowingreclassification of items to profit or loss

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In accounting the word reclassification is often used to describe moving an amount from one general ledger account to another For example if an expense was charged to marketing supplies instead of administrative supplies the correcting entry might read To reclassify from marketing supplies to administrative supplies Reclassification can also refer to other situations For example when a companys longterm note payable becomes due in less than one year the note will be reclassified to the current liabilities section of the balance sheet If a company stops using one of its buildings and puts the building up for sale the building will be reclassified from Property Plant and Equipment to the Investments section of the balance sheet Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods Accounting Capital Home Journal Entries What is a Reclass Entry What is a Reclass Entry Reclass Entry Accounting for a business also means being responsible for adjustments and corrections One such adjustment entry is reclass or reclassification journal entry The process of transferring an amount from one ledger account to another is termed as reclass entry It is most often seen as a transfer journal entry is a critical part of the final accounts of a business Uses of this entry For correction of a mistake For reclassification of a longterm asset as a current asset For reclassification of a longterm liability as a current liability To change the type purpose of an asset in the financial statements Example Reclass Entry Though there are quite a few reasons to perform a reclass entry however we will illustrate one of the most common scenarios ie correction of a mistake The finance department booked payment of Rent expenses for current month using the below journal entry Error journal entry rent debit by mistake The above entry was See Answer

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