What do I do when the prior years profit and loss statements were?
You have one of two options, which depend upon the magnitude of the error and a judgement call. If you are well into the current year and discover an immaterial error, I would just flush it through the current year and not disrupt the prior year. You could charge it to a non-operating expense type called Prior Year Adjustment, so that current period is not diluted in a non-obvious way. If the adjustment is material, you may have to re-open the books last year, book the adjusting journal entry, then re-rolled your new beginning balances (for the current calendar or fiscal year) forward. Whether you choose to do this is a senior financial management decision (CFO). If youre a publicly-traded company in the US, youll have to file an amendment to your 10-K filing (10-K/A) and file amendments to any already-filed state and federal income tax returns. Its kind a big deal, unpleasant and a whole lot of work.