Show Instructions Question 38 2 In 2021, an error is discovered in the financial statements from a transaction that occurred in the previous year (2020). The error caused expenses to be understated. What is the proper way to correct the error? No correction is necessary as the error occurred in a previous year. Through a prior period adjustment to the beginning balance of retained earnings on the retained earnings statement Through a prior period adjustment to expenses on the income statement. Through a prior period adjustment to the ending balance of retained earnings on the balance sheet