Correction of Errors
The procedures used to correct an error vary according to the nature of the error and the circumstances surrounding it. The procedures to correct the errors are summarized below.
Correcting the first two types of errors involves simply drawing a line through the error and inserting the correct title or amount. Usually, the person making corrections enters his or her initials near the correction, in case questions arise later.
Example
Assume that on January 5th, a $10,500 purchase of office equipment was incorrectly journalized as a debit to Supplies and as a credit to Accounts. The incorrect posting is shown in the following T Accounts:
Comparing the two sets of T Accounts indicates that the incorrect debit to Supplies can be corrected by debiting Office Equipment for $10,500 and crediting Supplies for $10,500. The correcting entry is then journalized and posted.
Date |
Account Title |
Post. Ref |
Debit |
Credit |
|
Office Equipment |
|
$10,500 |
|
|
Supplies |
|
|
$10,500 |
Types of Error:
1. Journal entry is incorrect but not posted.
Correction Procedure: Draw a line through the error and insert the correct title or amount
2. Journal entry is correct, but posted incorrectly.
Correction Procedure: Draw a line through the error and post the entry correctly.
3. Incorrect journal entry is posted.
Correction Procedure: Journalize and post a correct entry.