When should correction of errors be recorded?

The correct choice highlights that errors should be corrected in the year they are discovered to ensure the financial statements reflect accurate and reliable information for users. This approach aligns with the fundamental principles of accounting, mainly the integrity of financial reporting and the importance of timely corrections.

Recording errors in the year they are discovered allows stakeholders, including investors and creditors, to have updated and accurate financial information. This practice adheres to the matching principle, which states that expenses should be recognized in the same period as the revenues they help generate. Thus, entering corrections in the current year maintains the relevance and reliability of financial statements.

In contrast, recording corrections at the beginning of the next financial year or when preparing the next annual report would delay addressing inaccuracies, which could mislead those relying on the financial data. Additionally, always making corrections in the previous year would not consider the practical and timely nature of accounting practices, potentially complicating the financial reporting process for the current period.