Accounting errors in a business can lead to major repercussions. It may result in tax misfilings, inaccurate financial statements, and regulatory compliance issues. In this article, we have jotted down some common accounting mistakes you must avoid. If you face these accounting errors, you must hire Bergen County accounting services. Let’s dive in!
Common accounting mistakes and how to spot them
1. Data entry errors
When false information is entered into your books, you risk making data entry accounting errors. For your accounting system to have accurate information, the integrity of your data is essential. Errors in data entry can include:
- Making a mistaken numerical entry.
- Putting the right number in the incorrect sequence.
- Typing words instead of numbers, or the other way around.
2. Omission errors
Forgetting to record a purchase or sale is an accounting blunder, sometimes known as a false negative. Your data integrity is jeopardized when you forget to enter a transaction. An employee’s pay or a budgetary component utilized to make a significant financial selection could be that entry.
3. Duplication errors
When revenue or expenses are entered twice, duplicate mistakes occur. Depending on what was duplicated, duplicate entries can significantly affect your accounting system or any result. Everything can be copied, including wages and credit or debit entries on purchase orders.
4. Calculation errors in depreciation
Improperly computing depreciation expenses can distort asset valuation and profitability measures. Regularly check your depreciation schedules to identify and correct depreciation problems. Make sure that each asset has the appropriate depreciation rates and techniques applied to it. To reduce errors, use accounting software that offers thorough asset tracking and automates depreciation calculations.
5. Entry reversal errors
Principle mistakes and entry reversal errors are similar in that transaction data is entered in the incorrect direction, causing entry reversal. Stated differently, a debit or credit was made. Entry reversal compromises the accuracy of your books and financial statements. Let’s take an example where you record a debit as a credit. When settling the accounts, your liabilities are only a small sum of money, and your assets include an amount that doesn’t exist.
Wrapping up
Businesses can effectively correct common accounting errors by continuously overviewing their financial records and implementing robust internal controls.
