Learn It
Bookkeeping errors happen. A transaction gets entered twice. A customer payment goes to the wrong account. A loan deposit is recorded as revenue. These are not signs of a bad bookkeeper — they are normal. What matters is knowing how to spot them, understand them, and fix them correctly.
The most important principle in fixing errors is this:
A strange balance is a clue, not a diagnosis. Before creating a journal entry, the bookkeeper needs to understand what caused the problem. Otherwise, the "fix" can make things worse.
Common Error Types
Here are the most common bookkeeping errors, what symptom they produce, why they matter, and how a bookkeeper investigates them.
Duplicate Transactions
What happened: The same transaction was entered twice — maybe a bill was paid and the payment was recorded, then the bill was also marked as paid separately.
Symptom: An expense account is too high. Cash is too low. Or Accounts Payable shows a negative balance.
How to fix: Reverse one of the duplicate entries. Do not delete it — reversing creates an audit trail.
Missing Transactions
What happened: A transaction was never recorded — maybe a bank fee, a deposit, or a credit card charge.
Symptom: The bank reconciliation does not work. The book balance and bank balance differ by the missing amount.
How to fix: Record the missing transaction with the correct date and account. See Bank Reconciliation.
Wrong Account
What happened: A transaction was recorded to the wrong account — maybe equipment was recorded as repairs, or a loan payment was recorded entirely as interest.
Symptom: One account is too high, another is too low. The P&L or Balance Sheet looks unusual.
How to fix: Reclassify the amount — move it from the wrong account to the correct account with a journal entry.
Customer Payment Recorded as New Revenue
What happened: A customer paid an existing invoice, but the bookkeeper recorded the payment as a new sale instead of reducing Accounts Receivable.
Symptom: Revenue is overstated. Accounts Receivable is overstated (the invoice still shows as unpaid).
How to fix: Debit Service Revenue and credit Accounts Receivable to reverse the incorrect revenue and reduce the receivable. See Accounts Receivable.
Credit Card Payment Recorded as Expense
What happened: The business paid the credit card bill, but the bookkeeper recorded it as a new expense instead of reducing the credit card liability.
Symptom: Expenses are overstated. The credit card liability is overstated.
How to fix: Debit Credit Card (to reduce the liability) and credit the expense account that was wrongly debited. See Credit Cards.
Transfer Recorded as Income or Expense
What happened: Money moved between two business bank accounts, but the bookkeeper recorded it as income or expense.
Symptom: Revenue or expenses are overstated. One bank account balance is wrong.
How to fix: Debit the receiving account (Savings) and credit the sending account (Checking). See Banking Transactions.
Loan Proceeds Recorded as Revenue
What happened: The business received loan money, but the bookkeeper recorded it as a sale.
Symptom: Revenue is overstated. There is no loan liability on the books.
How to fix: Debit Service Revenue and credit Loan Payable. See Loans and Debt.
Owner Contribution as Revenue / Owner Draw as Expense
What happened: The owner put personal money into the business (recorded as revenue) or took money out (recorded as expense).
Symptom: Revenue or expenses do not reflect actual business activity. Equity is wrong.
How to fix: Reclassify to Owner Equity. Contributions are not revenue; draws are not expenses. See Owner Equity.
Negative Accounts Receivable or Accounts Payable
What happened: A/R is negative (a customer overpaid or a payment was applied to the wrong customer). A/P is negative (a vendor was overpaid or a bill was entered without the matching payment).
How to fix: Investigate the customer or vendor detail. Find the misapplied payment or duplicate entry and correct it.
How a Bookkeeper Investigates an Error
When a bookkeeper finds a suspicious balance, they follow a process:
- Notice the symptom. A negative balance, a duplicate, an unusual amount.
- Look at the detail. Open the account register. Find the transactions that make up the balance.
- Identify the cause. What happened? Was a transaction duplicated, misclassified, or missing?
- Determine the correct treatment. What should the books say?
- Record the correction. Create a journal entry or edit the transaction to fix it.
- Recheck the affected balance. Confirm the fix worked and the balance now makes sense.
The bookkeeper never skips step 3. Fixing a number without understanding what happened can hide the real problem — or create a new one.
Do It
Below is a transaction register containing 6 deliberate errors. For each one, identify what is wrong and enter the correct account and amount for the correcting entry.
Do It — Find and Fix the Errors
Below is a transaction register containing 6 deliberate errors. For each error, identify what is wrong, then enter the correct account and amount for the debit side of the correcting entry.
Remember: find out what happened before fixing the number.
Error 1 of 6
Rent payment — Check #2087
Oct 5 · $1,200Enter the correct account for the debit side of the correcting entry, and the amount:
Correct Account (Debit)
Amount
Prove It
Answer each question, then read the explanation. There's no score — this is just to help the ideas stick.
Question 1
A bookkeeper notices that the bank balance and the book balance do not match. What should they do first?
Question 2
A customer pays an existing invoice for $1,200, but the bookkeeper records it as a new $1,200 sale instead of reducing Accounts Receivable. What is the effect on the books?
Question 3
A business transfers $1,000 from checking to savings, but the bookkeeper records it as a $1,000 expense. What is wrong with this treatment?
Key Takeaways
- Find out what happened before fixing the number.
- Common errors include duplicates, missing transactions, wrong accounts, and wrong amounts.
- Customer payments should reduce A/R, not create new revenue.
- Credit card payments reduce the liability — they are not new expenses.
- Transfers between business accounts are not income or expense.
- Loan proceeds are not revenue; loan principal payments are not expenses.
- Owner contributions are not revenue; owner draws are not expenses.
- Negative A/R or A/P is a sign of a misapplied payment or duplicate entry.