Fixing Multiple Accounts With AJEs
You can fix the $10,000 error that was posted as $1,000 for cash in bank, but what if of that $10,000, $3,000 was charge account customers, meaning a post to your accounts receivables.
Remember this is our initial incorrect journal entry and we are off by $9,000:
- Debit to Bank Account 1000 - $1,000
- Credit to Cash Sales 1117 – (-1,000)
Now, let’s take a look at how it’s easily adjusted to reflect the entire $10,000 with $3,000 going to accounts receivables.
Account Number – Account Name – Amount – Debit or Credit
- 1110 – A/R Sales - $3,000 - Credit
- 1117 – Cash Sales - $6,000 – Credit
- 1001 – Cash in Bank - $9,000 – Debit
Here again, our debits and credits equal, we now have the appropriate cash in the bank and have adjusted the accounts receivables and cash sales. AJEs are usually entered into a general journal or an adjusting journal.
The importance of adjusting journal entries is essential for accurate financial records and to ensure your reports such as your balance sheet, income statement, and trial balance are corrected. Often bookkeepers will print an initial trial balance to see if all the debits and credits equal and if not, research the error, make the necessary AJEs and then reprint an adjusted trial balance.
Failure to follow the general accounting principles meaning all debits and credit must equal and that account balances can ONLY be adjusted via adjusting journal entries is key in maintaining accurate accounting records.
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