Correction of Errors in Accounting


Meaning:

According to the double entry system, every transaction affects at least two accounts, one debit and the other credit with the same amount. At the end of each trading year, a trial balance is extracted to verify the arithmetical accuracy of the double entry system. In other words an agreed trial balance indicates that for every debit entry there has been a corresponding credit entry or entries. However, it does not prove that all the entries are for the correct amount or made to the correct accounts.

Many mistakes may remain even if a trial balance agrees. These mistakes may relate to the original documents, such as invoices, credit or debit notes etc., and they may also arise through wrong calculations, incorrect quantities, wrong posting and wrong transfer of entries.

Whenever figures are copied, there exists the risk of error. If the original documents (invoices, credit or debit notes etc.) from which entries are made are correct the next possible source of mistake is in the book of original (prime) entry itself. Then the errors may be made in posting from the books of original entry into the ledger, or in taking out the balances of the ledger accounts.

Whenever errors are discovered from any account, they cannot be crossed out or erased. Corrections must be done through journal entries. The necessary corrections will then be posted to the accounts involved in the ledgers.

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