Like other professionals, bookkeepers and accountants can make mistakes.  The difference is that these mistakes might direct you and your company to make the wrong business decisions and have you headed in the wrong direction.

In order to avoid or correct such mistakes, you must first know is how to detect them. After detecting specific mistakes, you should know which methods to use to correct those mistakes. Here are the most common accounting mistakes and few helpful tips to hope you fix such errors and mistakes.

Most Common Accounting Mistakes and Errors

Transposition Error: This type of error takes place when the accountant – or the system – reverses or transposes numbers. For instance, the number 49 is written 94. This error can be easily corrected by simply double checking specific data entries.

Error of Principle: This error occurs when a specific transaction is registered against accepted principles of accounting. Examples of this type of error include, fixed assets that gets expensed instead of getting capitalized or the recording of capital contributions as loans or the recording personal expenses as business expenses.

Error of Omission: This error happens when a transaction is missed partially or wholly. In this situation, the entry is overlooked or forgotten.  Examples include, forgetting to record a specific entry, failure to record expenses, or not mentioning/documenting an adjustment to a specific inventory item.

Error of Commission: This type of error implies an incorrect entry was posted.   Examples include, recorded the incorrect amount to the correct account – it’s in the right place but the wrong amount; calculation error – the amount totaled or calculated is incorrect; reversal of entries  – the amount is correct but it was debited when it should have been credited or vice versa; or compensating errors – two errors of the same amount that leave the books balanced.

Knowing the types of errors and mistakes that can be made is just half the battle.  What do you do when you find one of these?

This is a guest post by Ricky Palermo, full-time employee at an accounting company and occasional guest blogger on accounting, SEO, and careers.