With the growing reliance on affordable and semi-automated accounting and payroll software, it is still too easy to fall into the trap of blindly accepting everything as the gospel truth.
Here is a list of common bookkeeping errors that can potentially wreak havoc with any financial record keeping and reporting - manual and automated.
Omitting transactions It is important to record all transactions, whether they are large or small. Failing to record a transaction can lead to inaccuracies in financial statements and reports.
Recording transactions in the wrong account It is important to accurately categorize transactions in the appropriate account. For example, recording a payment to a supplier in the wrong account can lead to errors in the accounts payable and accounts receivable balances.
Mathematical errors Double-check calculations to ensure they are accurate. A simple mathematical error can lead to incorrect financial statements and reports.
Incorrectly reconciling bank statements Bank reconciliation is the process of comparing the transactions recorded in the company's accounting records to those recorded by the bank. Incorrectly reconciling bank statements can lead to errors in the company's financial statements.
Not keeping up-to-date records It is important to keep up-to-date records in order to accurately reflect the financial position of the business. Failing to do so can lead to errors and difficulties in preparing financial statements.
Not following Generally Accepted Accounting Principles (GAAP) GAAP is a set of guidelines that provides a standard framework for financial reporting. It is important to follow GAAP in order to ensure that financial statements are accurate and reliable.
Mixing personal and business expenses It's important to keep personal and business expenses separate to avoid confusion and to make it easier to track business income and expenses.
Not keeping track of payables and receivables It's important to keep track of payables (money that the business owes) and receivables (money that the business is owed) to ensure that the business has a clear picture of its financial position.
Not keeping track of taxes It's important to keep track of taxes and to pay them on time to avoid penalties and interest.
Not reviewing financial statements regularly Financial statements provide a snapshot of the business's financial health and should be reviewed regularly to identify any problems or areas for improvement.
Transposing numbers This is a common error that occurs when numbers are entered incorrectly, such as reversing the digits of a number or entering a number in the wrong column.
Double-counting transactions This error occurs when a transaction is recorded more than once, resulting in an inflated financial position.
Using the wrong exchange rate If a business operates in multiple currencies, it's important to use the correct exchange rate when recording transactions. Using the wrong exchange rate can result in incorrect financial statements.
Philip Seigel CPA FFIN, 22 November 2022
Comdex Training Centre
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