Correcting entries: how to find and fix bookkeeping errors

Every set of books picks up errors. A digit gets swapped, an amount gets an extra zero, a bill is coded to the wrong account, a payment is entered twice. What separates careful bookkeeping from careless bookkeeping is not the absence of errors but how they are fixed. In a proper ledger you never erase or overwrite a posted entry. You record a correcting entry: a new, dated journal entry that, added to what is already there, leaves every account at the balance it should have had all along. The original mistake and its fix both stay visible, which is exactly what an auditor or a future you will want to see.

This page covers how to find the common kinds of error, using a few simple tests on the trial balance, and then how to fix each one with a correcting entry.

A method that works for every correction

Whatever the error, the same three steps give you the correcting entry:

1. Write down what was recorded, account by account.
2. Write down what should have been recorded.
3. Record the difference for each account. If an account has too much on its debit side, credit it; if it has too little, debit it. Accounts that are already right do not appear.

An alternative that is always correct, though longer, is to reverse the whole wrong entry and then record the right one. The two lines that cancel out (for example, Cash debited and credited for the same amount) net away, leaving the same result. Our checker accepts either approach, because it compares the net effect on each account.

Finding errors: what the trial balance can and cannot tell you

A trial balance only proves that total debits equal total credits. Some errors break that equality and show up immediately; others leave the trial balance in balance and can only be found by reviewing the entries.

Errors that throw the trial balance out of balance

• One-sided entries. Only one side of an entry was posted, or one side was posted to the wrong column. If the debit to Supplies was posted but the credit to Accounts Payable was not, debits exceed credits by the amount of the entry. If the credit was posted as a debit, debits exceed credits by twice the amount.
• Transpositions on one side only: $9,786 posted as $9,876 to one account.
• Slides on one side only: $899.00 posted as $89.90.
• Addition errors when an account or the trial balance itself was totalled.

Three quick tests on the difference

Work out the difference between the debit and credit totals, then try these:

1. Look for the amount itself. If the difference is $412.50, search for a $412.50 entry with only one side posted.
2. Divide by 2. If the result matches an entry, a debit was probably posted as a credit (or the reverse). A $1,650.00 difference often means an $825.00 credit posted as a debit.
3. Divide by 9. If the difference divides evenly by 9, suspect a transposition or a slide. Swapping two adjacent digits always produces a difference divisible by 9: $9,876 − $9,786 = $90, and $90 ÷ 9 = $10. Moving the decimal point one place does too: $899.00 − $89.90 = $809.10 = 9 × $89.90.

Errors that leave the trial balance in balance

These are the dangerous ones, because nothing flags them:

• Wrong account. A repair debited to Equipment instead of Repairs Expense. Both sides were posted, so totals still agree.
• Wrong amount on both sides. A transposition or slide made when the journal entry itself was written.
• Duplicated entries and omitted entries.
• Reversed entries, with debit and credit swapped.

These are found by reviewing source documents, by reconciliations (a bank reconciliation finds many cash errors), and by asking whether each balance makes sense. Every exercise in this lesson is one of these: the error has been found, and your job is to fix it.

One-sided posting errors are usually fixed by correcting the ledger posting itself, not by a journal entry, because a journal entry must always balance. Some businesses park an unexplained difference in a temporary suspense account while they investigate; that technique is not used in these exercises.

Worked examples

The wrong account

Northside Print Shop paid $3,995.00 in cash for a newspaper advertisement. The bookkeeper recorded it as a debit to Supplies and a credit to Cash. The amount and the credit to Cash are right.

Recorded: Supplies +$3,995.00, Cash −$3,995.00. Should have been: Advertising Expense +$3,995.00, Cash −$3,995.00. Cash is already right. Supplies has $3,995.00 too much (credit it); Advertising Expense has $3,995.00 too little (debit it).

Recording the advertisement again (debit Advertising Expense, credit Cash) would leave Supplies overstated and take $3,995.00 out of Cash a second time.

A transposition

Northside Print Shop paid $9,786.00 in cash for shop rent, but the entry was recorded as $9,876.00 on both sides. The accounts are right.

Too much was recorded, by $9,876.00 − $9,786.00 = $90.00. Rent Expense has $90.00 too much on its debit side, and Cash has $90.00 too much on its credit side. Reverse the excess:

A slide

Northside Print Shop paid $899.00 in cash for shop rent, but the entry was recorded as $89.90 on both sides.

Too little was recorded, by $899.00 − $89.90 = $809.10. Add it:

The direction of a correction depends on whether too much or too little was recorded. That is the most common slip in this lesson, and the checker names it.

An entry recorded twice

Northside Print Shop paid a supplier $5,597.00 on account. The payment was made once, but the entry was recorded twice.

One copy is right. Cancel the other by recording it with debits and credits swapped:

Wrong account and wrong amount together

Northside Print Shop collected $7,803.00 from a customer who was billed last month. The bookkeeper recorded a debit to Cash and a credit to Service Revenue, both for $7,830.00.

Use the three-step method:

The correcting entry is debit Service Revenue $7,830.00, credit Cash $27.00, credit Accounts Receivable $7,803.00. Debits and credits both total $7,830.00. Note the $27.00 difference: it divides by 9, the fingerprint of a transposition.

Dating and describing a correction

A correcting entry is dated when it is made, not on the date of the original error, and its description should say what it corrects: for example, "To correct entry of March 12: rent recorded as $9,876.00, should be $9,786.00." That one line saves a lot of time later, when someone wonders why Rent Expense has a small credit in the middle of the month. If the error is found after the period has been closed and reported, the treatment can be more involved, so check the business's policy before correcting a closed period.

Prevention helps too. Checking each entry against its source document before posting, reconciling the bank account every month, and reviewing any balance that looks unusual (a credit balance in an expense account, say) catch most of the errors in this lesson before they spread into the statements.

Common mistakes

1. Recording the transaction again instead of moving the amount between accounts.
2. Correcting the full amount when only the difference is wrong.
3. Correcting in the wrong direction. Too much recorded means take the difference out; too little means add it.
4. Reversing both copies of a duplicate. One really happened.
5. Fixing only one of two errors in the same entry. Check every account.

How the practice works

Each exercise describes an error that has been found, with amounts generated for you. Record the correcting entry and press Check: the checker adds your entry to the wrong one and compares the result with what should have been recorded, account by account, so a full reverse-and-re-record answer is marked right too. The set runs from a wrong account through transpositions, slides and duplicates to an entry with two errors at once.