Posting Adjustment Entries to the General Ledger
An important part of closing the accounting books for your business is posting to the General Ledger any corrections or adjustment entries you find as you close the journals. This type of posting consists of a simple entry that summarizes any changes you found.
Suppose you find that a customer purchase was recorded directly in the customer’s account record but not in the Accounts Receivable journal. You have to research how that transaction was originally recorded. If the only record was a note in the customer’s account, both the Sales account and the Accounts Receivable account are affected, and the correcting entry looks like this:
|To record sale to J. Doe on 3/15/2011 —
If you find this type of error, the Sales transaction record for that date of sale isn’t accurate, which means that someone bypassed your standard bookkeeping process when recording the sale. You may want to research that part of the issue as well because there may be more than just a recording problem behind this incident. For example:
Someone in your company may be allowing customers to take product, purposefully not recording the sale appropriately in your books, and pocketing the money instead.
A salesperson may have recorded a sale for a customer that never took place. If that’s the case and you bill the customer, he would likely question the bill, and you’d find out about the problem at that point.
The process of proving out your journals, or any other part of your bookkeeping records, is a good opportunity to review your internal controls as well. As you find errors during the process of proving out the books, keep an eye out for ones (probably similar errors that appear frequently) that may indicate bigger problems than just bookkeeping mistakes.
Repeat errors may call for additional staff training to be sure your bookkeeping rules are being followed to a T. Or such errors may be evidence that someone in the company is deliberately recording false information. Whatever the explanation, you need to take corrective action.