Correcting Accounting Journal Entries

179243211Tucson accountants use journal entries for adjusting the balances of ledger accounts in order to recognize accruals, liabilities, and other expenses. If the entry is incorrect, an accountant needs to correct the mistake to maintain the integrity of the ledger and the financial reports. Understanding which approach to take when correcting a ledger is crucial, as the process varies for reversing entire entries or making small adjustments to correct the balances.

Locate the entry

In order to correct a journal entry, you need to identify which accounts were affected. You can do this by reviewing the entry detail and determining what amount requires adjustment. In some situations, the entire entry may need reversal, while other cases may simply require a small adjustment. You can create the new entry using the same accounts as the original. For example, if the entry posted was short, such as posting a $300 entry when the amount should be $500, you need to place the accounts in the same order as on the original entry.

Enter adjustment amount

You need to enter the amount of the adjustment for each account. For example, if your original entry was short $200, you need to debit the expense account for an additional $200 and credit the accrual account for the same $200. If you need to reduce the posted entry, you should debit the accrual account and credit the expense account.

Reverse the entry

Reversing the entire entry requires reversing the accounts. To do so, credit the account that received the debt in the original entry and then debit the account that received the credit. Remember to post the same amounts to each of the accounts as they were posted in the original entries. Finally, you should check the trial balance to make sure the entry posted correctly.
Whether you need help setting up your Tucson bookkeeping system or managing your payroll service, Kalil & Associates can help. You can reach one of our Tucson accountants by calling us at (520) 628-4264. We are a full-service accounting firm that can help keep the financial components of your business running.