Can anyone help on counter-balance for error correction?

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  • #172146
    Anonymous
    Inactive

    I am very confused the counterbalance for error correction. Can anyone give me explanation? For example, on the book it says, on 12/31/ 2009 the wage expense is overstate by $100, and then on 12/31/2010 the wage expense will understate $100, so the wage expense in the beginning 2011 will be self corrected because the counter balance between 2009 and 2010.

    Why is that happened automatically? It may be a very silly question to all of you, but I really fell confused when i am reading the Wiley module of error correction. Please help me out. Thanks!!!!!

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  • #423001
    Anonymous
    Inactive

    I found this link. It provides very detail explanation for why. I completely understand how counterbalance works now.

    For the folks who like me have the samply questions, I want to share this link with you.

    https://accounting-financial-tax.com/2008/07/journal-entry-for-correction-of-errors-and-counterbalancing/

    #423002
    mike_terror
    Member

    @bigdream88

    thanks for sharing the solution and explanation. I'm studying for FAR too and also went over the counter-balancing error, but I kind of just accepted the rule as is without really thinking WHY.

    This should help me out. Thanks!

    #423003
    M.O.D.
    Member

    Because expenses are closed to Retained Earnings. If RE is debited 100 one year, then credited 100 the following year, the total corrects itself.

    BA Mathematics, UC Berkeley
    Certificates in CPA and EA preparation, College of San Mateo
    CMA I 420, II 470
    FAR 91, AUD Feb 2015 (Gleim self-study)

    #423004
    shwang010
    Member

    Even tho its 11 months ago..

    Thank you for posting this. I had problems understanding this as well

    #423005
    LoveEventing
    Member

    Thank you! Another confused soul here…

    BEC - 68, 76
    AUD - 90, 91
    FAR - 63, 83
    REG - 55, 79

    FINALLY DONE!

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