Do you know what the most common and costly mistakes made in corporate bookkeeping during the year are and how can these be avoided?
There are many simple checks and cross checks that can be done monthly to help find and correct common and costly bookkeeping mistakes.
Bank accounts, Accounts Receivable, Accounts Payable, and Sales Tax accounts are common areas of avoidable bookkeeping mistakes.
Bank accounts are often reconciled using a reconciliation report within your bookkeeping software. This is a step where you check transactions. Sometimes, even though this report will tell you the bank account is reconciled, an error has occurred within the software set-up and the account is not actually reconciled to the account balance on your ledger. This can be avoided by additional steps such as cross checking the numbers that the computer is relying upon. For example, checking that your closing bank statement balance per the reconciliation actually agrees to your bank statement for the month and that your closing bank account ledger balance per the reconciliation agrees to your ledger.
Accounts Receivable and Accounts Payable modules in accounting software sometimes will let you post a transaction to the controlling account without using the sub-ledger module. This creates errors in that your Accounts Receivable or Accounts Payable summary listing will no longer agree to the amount in your ledger account. This can be avoided by cross checking monthly that your summary Accounts Payable and Accounts Receivable report balances agree to your ledger. If you do this monthly, errors should be easy to identify and correct.
Sales tax returns are often filed based on the sales tax reports within your bookkeeping software. However, sometimes transactions get posted through the general ledger to these sales tax accounts without being linked to the sales tax reports. Therefore, it is important to cross check these sales tax reports each month to ensure they tie to the balances in the ledger. Then the appropriate adjustments can be made on the sales tax return for any discrepancies due to journal entries that were not caught by the monthly sales tax report.
Dawn Loeffler, BA (Hons), CPA, CA
Staff Accountant, Gilmour Knotts
Disclaimer: The information contained in this article is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. While we have made every attempt to ensure the information contained in this article has been obtained from reliable sources and accurately described herein. SW Media Group and Gilmour Knotts Incorporated is not responsible for any errors or omissions, or for the results obtained from the use of this information. Before taking any action that might affect your personal and business finances, you should consult a qualified professional advisor.