Accounting Error Correction Entries
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error is discovered in the accounting records, it should be corrected immediately to prevent the processing of wrong data which results to unreliable financial statements. This is done through a correcting entry. A correcting
Accounting Error Correction Exercises
entry is a journal entry whose purpose is to rectify the effect of accounting error correction letter an incorrect entry previously made. To illustrate how to prepare correcting entries, here are some examples. On December 5, 2014, correcting entries exercises Gray Electronic Repair Services paid $370 registration and licensing fees for the business. The correct entry is: Dec 5 Taxes and Licenses 370.00 Cash 370.00 Suppose the bookkeeper,
Correcting Entry Definition
for whatever reason, debited Transportation Expense instead of Taxes and Licenses. The entry made was: Dec 5 Transportation Expense 370.00 Cash 370.00 Upon analysis, the Transportation Expense is overstated (higher than in should be) because the bookkeeper recorded transportation expense but it was not really a transportation expense. Also, Taxes and Licenses is understated (lower than it should be). The amount
Accounting Errors Examples
should have been recorded but was not recorded under this account. To correct these errors, we should make an entry to offset the effects. Transportation Expense is overstated therefore we should decrease it; Taxes and Licenses is understated therefore we should increase it. The Cash account was credited in the entry made. Was the entry made to Cash correct? Look at the correct entry. Is it proper to have Cash credited? Yes. Therefore, we have no problem with the Cash account. Now, to increase Taxes and Licenses, we credit it. To decrease Transportation Expense, we debit it. Remember that to increase/record an expense, we debit it; to decrease an expense, we credit it. The correcting entry would then be: Dec 31 Taxes and Licenses 370.00 Transportation Expense 370.00 Note: The correcting entry is dated when the error is discovered. In this case, we assumed that it was discovered and corrected on December 31. If an explanation or annotation is required, it would be something like: "To correct error made on taxes and licenses" or "To record correction of error on entry made for taxes and licenses." After making this en
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Correction Of Errors In Accounting Questions
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