Question

Unfortunately, errors may occur in the recording process. Errors should be corrected as soon as they are discovered because accounting errors will snowball into much bigger problems! When an error is discovered, before the entries are posted, the error can be corrected by ruling through the item.

For the Unit 3 main discussion post, briefly define a correcting entry. When is a correcting entry necessary? What are the steps for correcting an incorrect amount posted to an account? Why is a source document associated with correcting entries?

Your main post should be at least 250-300 words long.

Answer 1

Definition: this is a journal entry for rectification of previously recorded transaction in respective ledger accounts. Such rectification entry is made as and when the error found – may be before the preparation of trial balance, after trial balance, or after the balance sheet.

Necessity: it is necessary for rectification the error and to fix the correct one for establishing the correct books of accounts. Such entry is necessary before the finalization of accounts.

Steps: There are three steps – first to find the correct entry, then to take the wrong entry done, and lastly to make the entry which requires for correction.

An example is taken in this regard – suppose there is a payment of salary of $4,000 which was wrongly recorded in utility expense account.

Correct entry		Wrong entry		Correcting entry
Salary debit	4,000	Utility debit	4,000	Salary debit	4,000
Cash credit	4,000	Cash credit	4,000	Utility credit	4,000

There is no mistake in credit. The error happens only in debit. Therefore, the correct debit is established by debiting salary and the wrong debit is removed by crediting utility expense.

Source: It is so associated because of finding the correct entry. In the above example salary slip may be the source document for establishing the fact that salary has been paid, not utility expense. Based on this information, necessary correction should be done.