1. The Rule of Correction
You cannot fix a ledger error by scratching it out, using white-out, or deleting entries. Any change to the general ledger must be made using a formal, recorded Correcting Journal Entry. This keeps the audit trail clean and visible.
2. Case Studies in Correcting Errors
Case A: Error of Principle (Incorrect Account Type)
- The Mistake: A company bought a machine for $5,000 cash but accidentally debited Repair Expense instead of the Machinery asset account.
- Analysis: Repair Expense is overstated; it needs a credit to reduce it. Machinery is understated; it needs a debit to increase it. Cash was recorded correctly, so it does not need a change.
Date Account Titles & Explanation Ref Debit ($) Credit ($)
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2026-06-30 Machinery Asset 1510 5,000
Repair Expense 6310 5,000
(To correct error of principle where
machinery purchase was treated as a repair)
Case B: Single-Leg Error Involving the Suspense Account
- The Mistake: A business paid $800 cash for office supplies. The cash credit was recorded correctly, but the bookkeeper forgot to make the matching debit to Supplies Expense, leaving the trial balance short of debits.
- Analysis: The temporary suspense account holds an $800 credit balance to prop up the system. To fix this, debit Supplies Expense to record the cost and credit the Suspense Account to remove the placeholder.
Date Account Titles & Explanation Ref Debit ($) Credit ($)
-------------------------------------------------------------------------------------
2026-06-30 Supplies Expense 6110 800
Suspense Account 2999 800
(To record the missing debit leg of the
cash supplies transaction and clear suspense)