Key Concepts
To correct an error, you prepare a journal entry that adjusts the accounts back to what they should be. Two ideas do most of the work:
- Correct only the difference when a transaction was recorded at the wrong amount (debit and credit share the same wrong figure). Work out the gap between the wrong figure and the right one, then adjust both accounts by that gap — top up if the figure was too low, reduce it if too high.
- Double the amount when the entry was recorded on the wrong sides (a reversed entry). You have to do two jobs in one entry: first cancel the wrong entry, then post the correct one. Each job is the full transaction amount, so the correcting entry is twice the amount.
For a transaction not recorded, there is nothing to cancel — just record the whole entry as it should have been. For a wrong-account error, take the amount out of the wrong account and put it into the right one.
The five corrections at a glance. These mini-examples show one correction of each type. (Narrations — the short explanation written under a journal entry — are left out here; in an exam you are usually told "narrations are not required".)
1. Wrong amount recorded. A credit sale of goods for $1,200 to Ravi was recorded as $120.
Only $120 was recorded instead of $1,200, so both accounts are short by $1,200 − $120 = $1,080. Top up the difference.
| Date | Particulars | Dr ($) | Cr ($) |
|---|---|---|---|
| Trade receivables — Ravi | 1,080 | ||
| Sales revenue | 1,080 |
2. Not recorded at all. A credit purchase of goods for $650 from Amber Traders was left out of the books.
Nothing was recorded, so record the whole entry now.
| Date | Particulars | Dr ($) | Cr ($) |
|---|---|---|---|
| Inventory | 650 | ||
| Trade payables — Amber Traders | 650 |
3. Recorded in wrong account (different element). Repairs to a motor vehicle, $800, paid by cheque, were recorded in the Motor vehicles account (an asset) instead of Motor vehicle repairs (an expense).
The cash side is correct; only the debit sits in the wrong account. Move it: put the expense in, take it out of the asset.
| Date | Particulars | Dr ($) | Cr ($) |
|---|---|---|---|
| Motor vehicle repairs | 800 | ||
| Motor vehicles | 800 |
4. Recorded in wrong account (same element). A credit sale of goods for $3,000 to Priya was posted to Kavitha's account. Both are trade receivables.
The sale itself was recorded correctly — only the customer is wrong. Debit the correct customer and credit the wrong one to move the amount across.
| Date | Particulars | Dr ($) | Cr ($) |
|---|---|---|---|
| Trade receivables — Priya | 3,000 | ||
| Trade receivables — Kavitha | 3,000 |
5. Recorded on wrong sides (reversed entry). A cheque for $2,500 was paid to a supplier, Faizal, but was recorded by debiting Cash at bank and crediting Faizal's account — both on the wrong sides.
The correct entry was Dr Trade payables — Faizal / Cr Cash at bank. To fix it, cancel the wrong entry and post the correct one — so use twice the amount, $2,500 × 2 = $5,000.
| Date | Particulars | Dr ($) | Cr ($) |
|---|---|---|---|
| Trade payables — Faizal | 5,000 | ||
| Cash at bank | 5,000 |
Difference for a wrong figure; double for swapped sides. A wrong amount is corrected by the difference. A reversed entry is corrected by twice the amount, because you cancel the wrong entry and post the correct one. A transaction not recorded is entered in full. A wrong account is moved out of the wrong account and into the right one.
Using the full amount to correct a reversed entry. A swapped-sides error needs double the amount — one lot to cancel the wrong entry, one lot to post the correct one. Using the single amount only cancels the error and leaves the correct entry unrecorded.
Using the full amount to correct a wrong-amount error. When a figure was recorded too low (or too high), only the difference is needed — correcting by the whole amount overstates or understates the account instead of fixing it to the correct figure.
Forgetting to remove the amount from the wrong account. In a wrong-account error, students often debit the correct account but forget to credit the wrong one — leaving the amount sitting in both accounts.