Common Bookkeeping Mistakes
A fast troubleshooting reference for the most common bookkeeping errors. Each mistake shows what you see, what may have happened, what to check, and why it matters.
A strange balance is a clue. Investigate before you correct it.
Banking
Transfer recorded as income
What You See
A transfer between business bank accounts shows up as revenue on the P&L.
What May Have Happened
A downloaded bank deposit was coded to a revenue account without checking whether it was actually a sale.
What to Check
Look at the bank description and the matching withdrawal in the other account. If both sides are business accounts, it is a transfer.
Why It Matters
Recording a transfer as income inflates revenue and makes the books look more profitable than they are.
Transfer recorded as expense
What You See
A transfer between business accounts shows up as an expense on the P&L.
What May Have Happened
A downloaded withdrawal was coded to an expense account without recognizing it was moving money between accounts.
What to Check
Check whether the matching deposit exists in another business account. If so, this is a transfer, not spending.
Why It Matters
Recording a transfer as an expense makes the business look less profitable than it is.
Loan proceeds recorded as revenue
What You See
A loan deposit appears as revenue on the P&L.
What May Have Happened
A large deposit from a lender was coded to a revenue account because it looked like income.
What to Check
Review the source of the deposit. If it came from a lender, it should be coded to a loan liability account.
Why It Matters
Borrowed money is not income. Recording it as revenue overstates both revenue and profit.
Bank fees missing from books
What You See
The bank reconciliation shows a difference, and the bank balance is lower than the book balance.
What May Have Happened
Bank fees were charged by the bank but never entered into the books.
What to Check
Compare the bank statement transaction list to the book register. Look for fees on the statement that do not appear in the books.
Why It Matters
Missing fees mean the book balance is too high and expenses are understated.
Duplicate downloaded transaction
What You See
The same transaction appears twice in the books.
What May Have Happened
A bank feed imported the same transaction more than once, or the bookkeeper entered it manually and it was also imported.
What to Check
Look for two entries with the same date, amount, and payee. Match them against the bank statement to confirm only one occurred.
Why It Matters
Duplicates inflate revenue or expenses and throw off account balances.
Reconciliation forced instead of investigated
What You See
The reconciliation shows a difference, and someone entered an adjustment to force it to zero.
What May Have Happened
Instead of finding the cause of the difference, the bookkeeper created a journal entry to make the reconciliation balance.
What to Check
Look for adjusting entries made on the reconciliation date with no clear explanation. Review the original difference.
Why It Matters
Forcing a reconciliation hides the real problem instead of fixing it. The underlying error remains in the books.
Customers and A/R
Customer payment recorded as new revenue
What You See
Revenue is higher than it should be, and Accounts Receivable still shows the old invoice as unpaid.
What May Have Happened
A customer payment was coded to a revenue account instead of being applied to the existing invoice.
What to Check
Look at the customer's A/R detail. If the invoice is still open but the cash was received, the payment was likely coded wrong.
Why It Matters
Revenue is double-counted — once when the invoice was sent and again when the payment was received.
Payment applied to wrong invoice
What You See
One invoice shows as paid when it should not be. Another invoice shows as unpaid when it should not be.
What May Have Happened
The payment was applied to the wrong invoice, possibly because the customer had multiple open invoices.
What to Check
Review the customer's open invoices and the payment remittance to see which invoice the customer intended to pay.
Why It Matters
The A/R aging is inaccurate, which can lead to collection calls on invoices that are actually paid.
Unapplied payment left unresolved
What You See
A customer payment is sitting in a clearing or unapplied account, or the customer shows a negative balance.
What May Have Happened
The payment was received but never matched to an invoice.
What to Check
Look at the customer detail for unapplied payments or credit balances. Match the payment to the correct invoice.
Why It Matters
Unapplied payments make it hard to know what is actually owed and can cause duplicate collection efforts.
Duplicate invoice
What You See
The same sale appears twice, and revenue is overstated.
What May Have Happened
An invoice was entered twice, or the same sale was invoiced and also entered as a sales receipt.
What to Check
Look for two invoices to the same customer with the same date and amount.
Why It Matters
Duplicate invoices overstate revenue and Accounts Receivable.
Negative Accounts Receivable
What You See
Total A/R is negative, or a specific customer shows a negative (credit) balance.
What May Have Happened
A payment was received and coded to the customer but not applied to an invoice, or a customer overpaid.
What to Check
Review the customer detail for unapplied payments or credits. Determine whether a refund or a credit memo is needed.
Why It Matters
Negative A/R usually means a payment is sitting in the wrong place. It distorts the Balance Sheet.
Customer credit handled incorrectly
What You See
A customer has a credit balance but the books do not reflect it properly.
What May Have Happened
A credit memo was not issued, or a refund was recorded as an expense instead of reducing A/R.
What to Check
Review the customer activity for returns, overpayments, or credit memos. Confirm the credit is applied correctly.
Why It Matters
Mishandled credits distort what the customer actually owes and can lead to over-billing.
Vendors and A/P
Bill payment recorded as another expense
What You See
An expense account is overstated, and Accounts Payable still shows the bill as unpaid.
What May Have Happened
The bill payment was coded to an expense account instead of reducing Accounts Payable.
What to Check
Look at the vendor's A/P detail. If the bill is still open but the cash went out, the payment was likely coded wrong.
Why It Matters
The expense is double-counted — once when the bill was entered and again when it was paid.
Duplicate vendor bill
What You See
The same bill appears twice, and expenses or A/P are overstated.
What May Have Happened
A bill was entered twice, or it was entered manually and also imported from a vendor portal.
What to Check
Look for two bills from the same vendor with the same date and amount.
Why It Matters
Duplicate bills overstate expenses and Accounts Payable, and can lead to paying the same bill twice.
Vendor credit not applied
What You See
A vendor credit is sitting unused, and the vendor balance is higher than it should be.
What May Have Happened
A credit from the vendor was entered but never applied to a bill.
What to Check
Review the vendor detail for open credits. Apply the credit to the correct bill.
Why It Matters
Unapplied credits mean the business could be paying more than it owes.
Negative Accounts Payable
What You See
Total A/P is negative, or a specific vendor shows a negative (credit) balance.
What May Have Happened
A payment was made to a vendor with no open bill, or a vendor credit was entered but not applied.
What to Check
Review the vendor detail for overpayments or unapplied credits.
Why It Matters
Negative A/P usually means money is sitting in the wrong place and distorts the Balance Sheet.
Payment applied to wrong vendor bill
What You See
One vendor bill shows as paid when it should not be. Another vendor bill shows as unpaid when it should not be.
What May Have Happened
The payment was applied to the wrong vendor or the wrong bill.
What to Check
Review the vendor's open bills and the payment remittance to confirm which bill was actually paid.
Why It Matters
The A/P aging is inaccurate, which can lead to paying the same bill twice or missing a real due date.
Credit Cards
Credit-card payment recorded as expense
What You See
Expenses are overstated and the credit card liability does not decrease.
What May Have Happened
The payment to the credit card company was coded to an expense account instead of reducing the credit card liability.
What to Check
Look at the credit card account and the payment. If the card charges were already recorded as expenses, the payment should reduce the card liability.
Why It Matters
Recording the payment as an expense double-counts the spending.
Missing charges
What You See
The credit card book balance does not match the statement balance.
What May Have Happened
Some credit card charges were never entered into the books.
What to Check
Compare the credit card statement to the book register. Find charges on the statement that are missing from the books.
Why It Matters
Missing charges understate expenses and the credit card liability.
Missing credits or refunds
What You See
The credit card book balance is higher than the actual card balance.
What May Have Happened
A refund or credit posted to the card but was never entered into the books.
What to Check
Compare the statement to the books for credits or refunds that appear on the statement but not in the register.
Why It Matters
Missing credits overstate the card liability and may overstate expenses.
Card account not reconciled
What You See
The credit card balance on the Balance Sheet does not match the statement.
What May Have Happened
No one has reconciled the credit card account to the monthly statement.
What to Check
Reconcile the card to the latest statement. Investigate any difference.
Why It Matters
An unreconciled card balance may be wrong, which affects the Balance Sheet and expense accuracy.
Loans
Loan proceeds recorded as income
What You See
A loan deposit appears as revenue on the P&L.
What May Have Happened
The loan deposit was coded to a revenue account because it looked like income.
What to Check
Review the source of the deposit. If it came from a lender, it should be coded to a loan liability.
Why It Matters
Borrowed money is not income. Recording it as revenue overstates revenue and profit.
Entire loan payment recorded as expense
What You See
The full loan payment appears as an expense, and the loan balance never decreases.
What May Have Happened
The entire payment was coded to an expense account instead of splitting it between interest and principal.
What to Check
Review the loan statement for the principal and interest breakdown of each payment.
Why It Matters
Only the interest is an expense. The principal reduces the loan liability. Recording the full payment as expense overstates expenses and leaves the loan balance too high.
Principal and interest not separated
What You See
The loan balance decreases by the full payment amount, or expenses are understated.
What May Have Happened
The entire payment was applied to the loan principal with no interest expense recorded, or vice versa.
What to Check
Review the loan statement for the correct split between principal and interest for each payment.
Why It Matters
Mixing principal and interest distorts both the P&L (interest expense) and the Balance Sheet (loan balance).
Loan balance never reconciled to lender statement
What You See
The loan balance on the Balance Sheet does not match the lender's statement.
What May Have Happened
No one has compared the book loan balance to the lender's statement.
What to Check
Obtain the lender statement and compare the principal balance to the books. Investigate any difference.
Why It Matters
An unreconciled loan balance may be wrong, which affects the Balance Sheet.
Equity
Owner contribution recorded as revenue
What You See
Money the owner put into the business shows up as revenue on the P&L.
What May Have Happened
An owner deposit was coded to a revenue account instead of an equity account.
What to Check
Review the source of the deposit. If it came from the owner's personal funds, it should be coded to Owner Contribution or an equity account.
Why It Matters
Owner contributions are not income. Recording them as revenue overstates revenue and profit.
Owner draw recorded as expense
What You See
Money the owner took out shows up as an expense on the P&L.
What May Have Happened
An owner withdrawal was coded to an expense account instead of an equity account.
What to Check
Review the withdrawal. If it was for the owner's personal use, it should be coded to Owner Draw or an equity account.
Why It Matters
Owner draws are not business expenses. Recording them as expenses understates profit.
Personal activity mixed with business activity
What You See
Personal transactions appear in the business books, or business transactions are missing because they were paid personally.
What May Have Happened
The owner used personal accounts for business spending or business accounts for personal spending without proper classification.
What to Check
Review bank and credit card activity for transactions that do not relate to the business. Confirm whether personal payments for business expenses need to be recorded.
Why It Matters
Mixing personal and business activity distorts revenue, expenses, and equity.
Financial Statements
Negative A/R or A/P ignored
What You See
Accounts Receivable or Accounts Payable shows a negative balance on the Balance Sheet.
What May Have Happened
A payment was received or made with no matching invoice or bill, or a credit was not applied.
What to Check
Review the customer or vendor detail for unapplied payments, credits, or overpayments.
Why It Matters
Negative A/R or A/P usually means a payment is sitting in the wrong place and distorts the Balance Sheet.
Large clearing balance ignored
What You See
A clearing account or Undeposited Funds has a balance that is not near zero.
What May Have Happened
Customer payments were recorded to the clearing account but never moved to the bank account, or processor fees were not accounted for.
What to Check
Review the clearing account detail for old, unresolved balances. Determine whether payments were deposited or fees were missed.
Why It Matters
Old clearing balances signal that money is stuck in the wrong account and revenue or cash may be misstated.
Old Undeposited Funds balance
What You See
Undeposited Funds has a balance that has been sitting for a long time.
What May Have Happened
Customer payments were recorded but never grouped into a bank deposit.
What to Check
Review the Undeposited Funds account for old payments. Confirm whether the deposits were actually made to the bank.
Why It Matters
An old Undeposited Funds balance may mean payments were never deposited, or the deposit was recorded but the clearing account was not cleared.
Balance Sheet accounts placed on P&L
What You See
Accounts like Equipment, Loan Payable, or Owner Draw appear on the Profit & Loss statement.
What May Have Happened
Accounts were miscategorized, or transactions were coded to the wrong account type.
What to Check
Review the chart of accounts and the affected transactions. Confirm whether the account is an asset, liability, equity, income, or expense.
Why It Matters
Balance Sheet accounts on the P&L distort both net income and the Balance Sheet.
Unusual balances corrected without investigation
What You See
A strange balance was fixed with a journal entry, but no one determined what caused it.
What May Have Happened
The bookkeeper created an adjustment to make the balance look normal instead of finding the root cause.
What to Check
Review the adjusting entry and the transactions that led to the unusual balance. Determine what actually happened.
Why It Matters
Correcting without investigating hides the real problem. The underlying error may still affect other accounts.