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Financial & Managerial Accounting
Found in: Page 79

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Short Answer

If an incorrect amount is journalized and posted to the accounts, how should the error be corrected?

The incorrect amount can be located and corrected by making a reverse inspection of accounting records.

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Step by Step Solution

Accounting errors

Accounting errors are the errors of recording and posting the transactions that affect the final accounts and provide inaccurate data for analysis.

Accounting errors can be – errors of commission, errors of omission, errors of compensation, etc.

Locating error

If any incorrect amount has been journalized and posted, it can be found out and corrected in the following way –

a) By verifying the trial balance column and locating any mismatch in total due to one-sided error in posting and maintaining accounts.

b) Verifying the account balances in the trial balance and in the ledger books.

c) By ensuring that the balance of the accounts has been listed on the correct side of the trial balance.

d) If the error is still unfound, re-compute each account balance.

e) The last step is to verify each and every recorded journal entry with the source document.

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