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Correcting Errors.

If errors are discovered in either the journal or the ledger, they must be corrected. Our approach to correcting errors depends on the kind of error and when it is discovered.

If an error in a journal entry is discovered before the error is posted, it can be corrected in a manual system by drawing a line through the incorrect informa­tion. The correct information is written above it to create a record of change for the auditor. Many computerized systems allow the operator to replace the incor­rect information directly. If a correct amount in the journal is posted incorrectly to the ledger, we can correct it the same way.

Another case is when an error in a journal entry is not discovered until after it is posted. We usually do not erase incorrect entries in the journal and ledger. Instead, the usual practice is to correct the error in the original journal entry by creating another journal entry. This correcting entry removes the amount from the wrong account and records it to the correct account.