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Accounting Errors
American Institute of
Professional Bookkeepers
Balance per books, 8/31 x,xxx Balance per bank, 8/31 x,xxx
Reconcile: Reconcile:
Items on the bank statement Items on the company’s
not (yet) recorded by books not on the
the company current bank statement
Corrected book bal., 8/31 x,xxx Corrected bank bal., 8/31 x,xxx
The goal: Make these two balances equal
Correcting Accounting Errors
Bank Reconciliation: Example 1
XYZ Corp
Bank Reconciliation
August 20X9
Balance per books, 8/31 x,xxx Balance per bank, 8/31 x,xxx
ook balance:
n of note Reconcile: xxx Add to bank balance:Reconcile:
on note xxx Deposits in transit xxx
Items on the bank statement Items on the company’s
not (yet) recorded byDeduct: books not on the
ck the company
xxx current bank statement
Outstanding checks xxx
vice charge xxx
Corrected book bal., 8/31 x,xxx Corrected bank bal., 8/31 x,xxx
Balance per books 11/30 16,150 Balance per bank 11/30 33,520
Deduct:
ck 1,000 Outstanding checks 9,810
rvice charge 30
Corrected book bal., 11/30 36,020 Corrected bank bal., 11/30 36,020
ok balance:
Book items to be
of note 20,000
reconciled require journal
n note 900
entries to adjust the current
Cash account balance of
$16,150 to the reconciled
ck 1,000 balance of $36,020
rvice charge 30
Corrected book bal., 11/30 36,020
Thus,
xxxthe adjusting entry was either:
Revenue xxx
Unearned Revenue xxx
Error:
Failure to record the AJE
Correction:
Record the AJE
Revenue xxx
Unearned Revenue xxx
Revenue xxx
Unearned Revenue xxx
Error:
Too much revenue recognized
Correction:
Record an adjusting entry that reduces the
revenue account to the correct balance
Revenue xxx
Unearned Revenue xxx
Correcting Accounting Errors
Deferred Revenue Errors
Review: If the advance payment was recorded as
revenue, the adjusting entry is:
Revenue xxx
Unearned Revenue xxx
Error:
Too little revenue recognized (too much deferred)
Correction:
Record an adjusting entry with the accounts
reversed. The amount must increase the
revenue account to the correct balance.
Unearned Revenue xxx
Revenue xxx
Correcting Accounting Errors
Deferred Revenue Errors
Example
On Sept. 1, LeaseCo
received $6,000 in advance The year-end AJE should be:
for a 12-month equipment Revenue 4,000
rental and credited Unearned 4,000
Revenue. Revenue
Correct the error if LeaseCo:
If LeaseCo failed to record an
(a) failed to record an AJE AJE, the correction is simply to
record it:
Revenue 4,000
Unearned 4,000
Revenue