Accounting Mishaps: It happens to Us All.

Accounting…accounting…accounting. So many rules to remember, so many things to record, so many deadlines to meet! It can definitely get a little tricky trying to make sure your records are timely and in tip top shape. I would be lying if I said I have never made a mistake. Whether you are just starting out or you have been doing it for years; the truth is, mistakes will happen and they do happen to us all.

There is a wide variety of mistakes that can happen in accounting but some of the most common include: recording the wrong date for a transaction, transposing numbers, and reversing journal entries. Let me give you a little background on myself; I have a bachelor’s and master’s degree in accounting and I have been working in the field since 2017. That’s two degrees where I majored in accounting and five years of experience…and guess what, I have made every one of those mistakes. Want to know why? Because it happens to the best of us and it most certainly is not something that needs to discourage your ability. Let’s take a look into those specific mistakes and how easy they can happen.

Common Mistake #1: Wrong Date Recorded for a Transaction

Say you are in the process of recording your journal entries at month end and instead of giving your journal entry the correct month end date, you accidentally record it for the following month. You pull your trial balance and see that your ending account balance does not equal what it needs to. You double check everything and you finally find that the balance being off was due to the wrong date on your journal entry. Easy fix, change your journal entry to the correct date and you should be good to go.

Common Mistake #2: Transposing Numbers

Transposing a number is simply recording the number backwards. So instead of an amount being recorded as 540, the amount is recorded as 450. Obviously, this can be a source of some frustration – a transposed number can make your bank reconciliation wrong and your account balances wrong. One of the easiest ways to ensure this does not happen is to take your time when recording items and make sure the correct amount is selected when preforming the bank reconciliation.

Common Mistake #3: Reversed Entries

When it comes time to prepare your month end journal entries, it is crucial that your entries are recorded properly. Doing a journal entry where you have the debits and credits mixed up can greatly impact your reports. Unfortunately, the only time this mistake is caught tends to be when the reports are previewed. Your trial balance tells the story of your financial information. For example, if you preview your trial balance and see that your accounts payable has a debit balance, that should automatically be a red flag. Accounts payable is a liability so that account should always have a credit balance. Seeing a debit balance would signal that something is wrong and the fix could be as simple as your journal entry needing to be coded correctly.

Accounting is an important concept to grasp, especially when it comes down to an accurate representation of your books. However, errors are going to happen and that is okay. It is important to take your time when working through financial information. By taking your time to complete your monthly task, you can eliminate the most common errors pretty quickly.

This article was written by Megan Clem, Accounting Specialist II with Baldwin CPAs. For questions or more information, please reach out to megan.clem@baldwincpas.com.