By Smart AT The integrity of your accounting system’s information is only as good as the data you enter. This includes adding an item to the relevant account, giving it the appropriate description or code, and entering the correct value.
Business management accounting errors, unfortunately, can result from simple mistakes or misconceptions of accounting concepts. When evaluating accounting reports, look for the following types of errors.
Data Entry Errors
Data entry errors occur when and where items are entered (or not recorded) into your accounting system. Here are some instances of common data entry errors:
- Items are being entered into the wrong account.
- Number transposition.
- Removing or adding a number or decimal point
- Leaving omitting or duplicating entries.
- Consider expenses as income or vice versa.
Omission Error
This is simply an error when recording an item. It’s not on purpose; it’s just ignored. For example, suppose you pay an invoice but need to record the transaction. Alternatively, you purchase a tablet but neglect to record it in your accounting system. This is easily performed if you need to place documents, such as a receipt or invoice so that they are never documented. Hire a small business accountant to avoid this mistake.
Commission Error
This is mishandling an item by putting it under the incorrect accounting heading. You enter the proper amount and deposit it in the correct general account, but you subsequently use the incorrect sub-account. For example, you may get payment for one invoice but record it against another customer’s invoice. Your total payments are correct for accounting purposes in the cloud based accounting apps, but the information displayed for a specific customer is erroneous.
Transposition Error
This mistake is generated by reversing numbers and entering the incorrect quantity for an item. Transposing a number can lead to an overstatement or misinterpretation of an item’s amount. For example, instead of entering an expense as Rs. 946, you enter it wrongly as Rs. 496. An error like this can be costly if a deductible amount is not claimed due to an entry error.
Compensating Error
This business management accounting error actually consists of two faults that occur at the same time, one of which offsets the other. It’s tough to notice because the overall effect is zero. For example, if you overstate your revenue by Rs.1,000 while underestimating your expenses by the same amount, everything balances out even if both entries are inaccurate.
Conclusion
At Smart AccTaxes, we are committed to offering the best possible experience while specializing in accounting, taxes, MIS, and CFO services for startups and growing enterprises.
When you engage with Smart AccTaxes, you get a team of business management accounting specialists who take the finance work off your plate, allowing you to focus on your business.
