Correct errors with journal entries
Write a balanced correction and trace how a classification error changes profit and financial position.
Section 3.2 · Correction of errors
Cambridge IGCSE Accounting 0452 / (9–1) 0985, 2027–2029 Version 1. These lessons follow the 2027–2029 syllabus only; the separate 2026 syllabus update is not yet mapped. Written practice is self-checked, not an official Cambridge grade. Full timed-paper practice and human subject-teacher review remain pending.
Before you begin
- No previous accounting study is assumed. Keep the business, transaction and accounting period in view, and distinguish a resource, a claim and a performance result.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Why can an equipment purchase recorded as an expense misstate both profit and the statement of financial position?
What you will learn
- Correct a ledger error using a journal entry
- Distinguish an error of principle from an error affecting only presentation
- Recalculate profit and statement-of-financial-position amounts after correction
Correct the original error, not just the final total
A journal correction transfers the amount from the account used in error to the account that should have been used. Record equal debits and credits, and explain the accounts and reason so the correction is auditable.
Suppose equipment was bought for $1,500 but debited to Repairs, while Bank was correctly credited. Debit Equipment and credit Repairs for $1,500. The original entry did not change cash, but it understated the asset and overstated expense.
Reassess the financial statements
Removing the incorrect repair expense increases profit by $1,500; recording equipment increases non-current assets by $1,500. This changes the statement of financial position as well as profit: the asset and the resulting equity were understated before correction.
Other corrections may leave profit unchanged or change it in the opposite direction. Work from the accounts affected; do not assume every correction changes profit by the amount of the journal entry.
Pause and explain
A $200 repair was incorrectly debited to Equipment, with Bank correctly credited. What is the correcting entry and profit effect?
Worked example
A $1,500 equipment purchase was debited to Repairs and credited to Bank. Give the correcting journal entry and effect on profit and assets.
Show the worked solution
- The Bank credit is already correct and remains unchanged.
- Debit Equipment $1,500; credit Repairs $1,500.
- Remove a $1,500 expense and recognise a $1,500 asset.
Answer The correction is Dr Equipment $1,500; Cr Repairs $1,500. Profit and non-current assets each increase by $1,500.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A $2,400 delivery van was debited to Motor expenses; Bank was correctly credited. Give the correction and effect on profit and assets.
Give me a hint
Move the amount from an expense to a non-current asset.
Compare my reasoning
- Debit Vehicles $2,400.
- Credit Motor expenses $2,400.
- Profit and non-current assets each increase by $2,400.
Dr Vehicles $2,400; Cr Motor expenses $2,400. Profit and non-current assets increase by $2,400.
Look for these in your work
- Journal balanced
- Accounts corrected
- Effects correct
A $360 electricity bill was debited to Repairs and credited to Bank. Correct the classification and say whether total expenses change.
Give me a hint
Both accounts are expenses; move the amount to the correct expense category.
Compare my reasoning
- Debit Electricity expense $360.
- Credit Repairs expense $360.
- Total expenses and profit are unchanged, but each expense category is corrected.
Dr Electricity expense $360; Cr Repairs expense $360. Total expenses and profit are unchanged.
Look for these in your work
- Correction balanced
- Categories correct
- Profit effect distinguished
A $900 machine was wrongly debited to Office supplies; Bank was correctly credited. Calculate the corrected profit if reported profit before correction was $6,200, and state the corrected equipment total if it was $4,800 before correction.
Give me a hint
Remove the full expense and recognise the missing asset.
Compare my reasoning
- Correcting entry: Dr Machinery $900; Cr Office supplies $900.
- Corrected profit = 6,200 + 900 = $7,100.
- Corrected equipment = 4,800 + 900 = $5,700.
Corrected profit is $7,100 and equipment is $5,700; the error had understated both by $900.
Look for these in your work
- Journal correct
- Profit recalculated
- Asset recalculated
Common mistakes
- Crediting Bank again when its original entry was correct
- Correcting the trial-balance difference without correcting the account classification
- Changing profit without tracing the affected income or expense
What can you explain now?
Equipment bought for $800 was incorrectly debited to Repairs. What two accounts correct the classification?
Compare with the explanation
Debit Equipment and credit Repairs $800
Move the debit from the expense account to the asset account; the Bank credit is unaffected.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
When a correction moves an amount between two expense accounts, what happens to total expenses?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.