Adjusting Journal Entries for Current Year Liabilities
Lesson:
Sometimes auditors find mistakes that need to be corrected, either because of fraud or mistakes by the original accounting team.
When an expense account is underrecorded (too low):
- Debit the expense
- Credit the liability
When an expense account is overrecorded (too high):
- Debit the liability
- Credit the expense
You're an accountant trying to implement the recommendations made by an external auditor.
You've been provided with the following information:
- An auditor reported that the repairs & maintenance account had been under reported by $75.00.
- The error occurred in the current year's records.
What journal entry or journal entries should be made?
Answer:
-
Repairs & maintenance $75.00 Accounts payable $75.00