What is the correcting entry for Advertising Expense related to an expense incurred but recorded in the wrong year?

To determine the correcting entry for an Advertising Expense that has been recorded in the wrong year, it's essential to understand the nature of the error and how corrections are typically recorded in accounting.

If an expense was incurred but recorded in a prior year, the correcting journal entry usually involves adjusting the current year’s financial statements to reflect the appropriate amount. In the context of the choices provided, a net credit to Advertising Expense indicates that the original expense was overstated in the prior year and that the current year's expense needs to be reduced.

When an expense is recorded incorrectly in a prior year, it means that the expense amount reported is higher than it should have been when considering the correct period. To correct this, the current year would need a credit to reverse the overstatement, reducing the Advertising Expense to accurately reflect the incurred expenses in line with the proper accounting period.

In the case of a net credit of $40,000, this implies that the advertising costs recorded in the prior period exceeded what should have been reported. Therefore, the entry appropriately addresses the correction needed for the financial statements to present a true and fair view of the company's current financial position regarding advertising expenses.

This correcting entry ensures that the company's financial records are accurate, providing stakeholders with reliable information while