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However, direct adjustments to Retained Earnings may occur in exceptional cases — most notably, the correction of prior-period errors in accordance with IAS 8. In such cases, entities must adjust the opening balance of Retained Earnings, not the current period’s Profit and Loss.

How to post a correction of a prior-period error directly to Retained Earnings

To correct a prior-period error in accordance with IAS 8, record a manual journal entry in the General Ledger:

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