Correcting Entries
What Are Correcting Entries?
Correcting entries are used to correct an error.
![ce1](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce1.jpg)
How it Works
The whole aim of the double entry accounting system is to ensure your record of transactions is correct.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce2.jpg)
For example, you check one side of your record of transactions by checking the control accounts.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce3.jpg)
You do this by comparing them to the records of other businesses.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce4.jpg)
After this, you prepared a trial balance.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce5.jpg)
If it balanced, then it proved the other side of your transactions was also correct.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce6.jpg)
With all these checks, your record of income and expenses should be correct.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce7.jpg)
Even so, mistakes are still possible.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce8.jpg)
For example, the business may have an intangible asset, such as a license.
![ce9](https://seeaccountingnow.online/wp-content/uploads/2021/06/ce9.jpg)
This will lose value over time.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce10.jpg)
With intangible assets, the loss of value is known as amortization.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce11.jpg)
Amortization needs to be recorded as an expense.
![ce12](https://seeaccountingnow.online/wp-content/uploads/2021/06/ce12.jpg)
However, an expense such as this may be mistakenly allocated to the depreciation account.
![ce13](https://seeaccountingnow.online/wp-content/uploads/2021/06/ce13.jpg)
Depreciation is the wrong expense account to use.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce14.jpg)
Depreciation relates to the value lost by tangible assets, such as equipment.
![ce15](https://seeaccountingnow.online/wp-content/uploads/2021/06/ce15.jpg)
Finding the Error
Normal checks won’t find this error.
![ce16](https://seeaccountingnow.online/wp-content/uploads/2021/06/ce16-1.jpg)
Allocating an expense to the wrong expense account won’t throw the system out of balance.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce17.jpg)
Nor will it affect profit.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce18.jpg)
The only way to find this error is to run your eye over the trial balance.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce20.jpg)
Once found, you need to correct any errors.
![ce21](https://seeaccountingnow.online/wp-content/uploads/2021/06/ce21.jpg)
Here, you need to take the value out of the depreciation account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce22.jpg)
And you move it to the correct account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce23.jpg)
To do this, you use the general journal.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce24.jpg)
You credit the depreciation account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce25.jpg)
This shows you have taken value from the depreciation account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce26.jpg)
After this, you debit the amortization account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce27.jpg)
This shows you moved the expense value to the amortization account.
![](https://seeaccountingnow.online/wp-content/uploads/2020/05/ce28.jpg)
© R.J. Hickman 2020