LO7 Analyze incorrect journal entries and prepare correcting entries.

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Presentation transcript:

LO7 Analyze incorrect journal entries and prepare correcting entries. LESSON 4-3 Journalizing Correcting Entries and Correcting Posting Errors Learning Objectives LO7 Analyze incorrect journal entries and prepare correcting entries. LO8 Demonstrate how to correct errors made during the posting process.

Memorandum for a Correcting Entry Lesson 4-3 Memorandum for a Correcting Entry LO7 An incorrect journal entry should be corrected with an additional journal entry, called a correcting entry. A memorandum is prepared as the source document describing the correction to be made. SLIDE 2

Journal Entry to Record a Correcting Entry Lesson 4-3 Journal Entry to Record a Correcting Entry LO7 Advertising Expense 120.00 April 17. Discovered that a payment of cash for advertising in March was journalized and posted in error as a debit to Miscellaneous Expense instead of Advertising Expense, $120.00. Memorandum No. 15. Miscellaneous Expense 120.00 1 Date 2 Debit 4 Source Document 3 Credit SLIDE 3

Correcting an Error in Posting to the Wrong Account Lesson 4-3 Correcting an Error in Posting to the Wrong Account LO8 2 1 1. Draw a line through the entire incorrect entry. 2. Record the posting in the correct account. Recalculate the account balance. SLIDE 4

Correcting an Incorrect Amount Lesson 4-3 Correcting an Incorrect Amount LO8 2 3 1 1. Draw a line through the incorrect amount. 2. Write the correct amount just above the incorrect amount in the same space. 3. Recalculate the account balance. SLIDE 5

Correcting an Amount Posted to the Wrong Column Lesson 4-3 Correcting an Amount Posted to the Wrong Column LO8 6 5 4 4. Draw a line through the incorrect item in the account. 5. Record the posting in the correct amount column. 6. Recalculate the account balance. SLIDE 6

Lesson 4-3 Audit Your Understanding 1. What is a correcting entry? ANSWER A journal entry made to correct an error in the ledger SLIDE 7

Lesson 4-3 Audit Your Understanding 2. When is a correcting entry necessary? ANSWER When a transaction has been improperly journalized and posted to the ledger SLIDE 8

Lesson 4-3 Audit Your Understanding 3. What are the three steps for correcting an incorrect amount posted to an account? ANSWER 1. Draw a line through the incorrect amount. 2. Write the correct amount just above the correction in the same space. 3. Recalculate the account balance. SLIDE 9

Lesson 4-3 Audit Your Understanding 4. What are the three steps for correcting an amount posted to an incorrect column? ANSWER 1. Draw a line through the incorrect item in the account. 2. Record the posting in the correct amount column. 3. Recalculate the account balance. SLIDE 10