It is crucial that all errors and omissions are addressed in accounting records; therefore, a special procedure exists to correct potential problematic entries. First of all, it is necessary to revise the financial statement from the previous period in order to determine that there was indeed an error. Next, it is crucial to analyze the impact of the error on the carrying assets amounts and liabilities of the company. Then, there can be two ways to address the existing error. The accountant can reverse the wrong entry, and they introduce a second entry containing the correct transaction (Weygandt et al., 2020). At the same time, the accountant also can make a journal entry which will fix the existing error if combined with the incorrect entry. For instance, a purchase of $20-wroth supplies can be credited as accounts receivable instead of accounts payable. In this case, the error can be rectified by crediting accounts payable for $20 and debiting accounts receivable for $20 in a single entry.
References
Robinson, T. (2020). International financial statement analysis. John Wiley & Sons.
Weygandt, J., Kimmel, P., & Mitchell, J. (2020). Accounting principles. John Wiley & Sons.