The auditing process conducted on a business institution looks into possible errors that may have been entered in the books. When accounting professionals find the mistakes, they immediately work to correct the data to avoid the wrong data from being used further into the recording. It may result in an unbalanced book or worse to make the financial statements unreliable. Mistakes that may be due to the wrong input of data or a typing error must be corrected immediately. But experts say that correcting the data is as important as understanding how it was committed.
There is no doubt that a seemingly simple accounting error impacts the overall financial status of the company. The cash flow, capital, profit and even the tax that your business ought to pay are affected by simple errors inputting the data in the system. A variety of things may cause the errors, but here is a list of the most common accounting errors committed by businesses.
· Imbalance in the Financial Statement
There are two types of balances that most companies have to keep a record of – the revenue account and the expense account. Both of which contains a list of when the money came into the company’s account and when it left. It practically shows business owners the cash flow. The revenue account must contain the cash inflow showing the actual credit balance of the company. On the other hand, the expense account must incur the debit balances. When the wrong data is put in the wrong balance sheet, the differences may result in an error altogether.
· Input of Data in the Wrong Year
Each year, the accountants tally the books in hope to achieve a balance in the ins and outs of cash to show whether the company earned or not. More than the simple recording of expenses, the books also ensure potential investors that they are putting their money on something useful. However, most businesses fail to keep their book closed for the fiscal year. When the books have been closed, remember not to go back to change any of the details. It is best to keep it that way. Unless it is a transaction that needs to be input in the records, it is best to have a professional accountant do it for you.
· Opting not to Include Particular Expenses or Details
Omitting data from the records may seem like nothing, but it can affect bookkeeping altogether. When you choose to delete data that should have been recorded, it can be the primary reason why your sheets are not balanced.
What’s the best way to keep you from committing these mistakes? Assign a professional accountant to take care of your business accounts. They are accurate, and they can make the process less consuming for you. Having the right audit firm will save you time and money in the long run, not to mention keeping your business from having an untrue financial statement.