How to Avoid Accounting Errors?

Common types of accounting errors
How to correct an error in the books

An accounting error is an amount, account or transaction recorded wrong in the books, or left out of them. This page sorts the common types, shows how a correction is recorded, covers what to do when the error is already on a filed US federal tax return, and explains who answers for the figures on that return. The routine checks that catch errors in the first place have their own page: 8 tips for catching accounting mistakes.

Billed publishes this page. Accounting quotes are from the open textbook OpenStax Principles of Accounting, Volume 1, sections 3.6, 8.2, 8.3 and 8.6, opened on November 1, 2026. Tax quotes are from IRS pages, each with its own date. This is general information for US small businesses, not accounting, tax or legal advice.

Common types of accounting errors

Errors fall into two groups: ones that stop the books from balancing, and ones that don't. OpenStax says a trial balance "can make those errors apparent when it does not balance", and also warns: "We can have errors and still be mathematically in balance."

Errors that usually leave a difference between debits and credits:

An amount in the wrong column. In OpenStax's trial balance example, a $100 balance sits on the credit side, and the text points out: "Dividends normally have a debit balance, but here it is a credit."
Transposed digits. A separate OpenStax trial balance, with totals of $35,800 and $34,000, has an account that "should be $3,500 and not $5,300."
A figure copied wrong from one record to the next. OpenStax: "You may discover in your investigation that you copied the number from the T-account incorrectly."

Errors that leave the totals equal:

The wrong amount on both sides of an entry. In OpenStax's bank reconciliation example, check 5386 for $2,000 "is removed from the bank account correctly but is recorded on the accounting records for $1,760." Both sides of that entry carry $1,760, so the books still balance.
A transaction never recorded. A bank reconciliation "identifies transactions that have not been recorded by the company that are supposed to be recorded", such as bank service charges or a customer's check that came back unpaid.
The same transaction recorded twice. Each copy is a balanced entry, so only a document or a bank statement shows the duplicate.
The right amount in the wrong account. Booking a cost to the wrong expense category changes neither total.
Personal spending recorded as a business expense. The entry balances, but the expense isn't a business one.

Errors on the bank's side: OpenStax notes that "the bank might report a check either with an incorrect balance or in the wrong client's checking account." In its example, a $320 check "should have been removed from the account of another customer of the bank." OpenStax says a reconciliation "includes categories for adjustments to both the bank balance and the book balance", and none of the journal entries it records afterward involves the $320. Ask the bank to correct its own record.

How to correct an error in the books

Find the document behind the entry, work out the difference, and record an entry that brings the accounts to the right balance. In OpenStax's words: "Journal entries are required to adjust the book balance to the correct balance." For how an entry is laid out, see what is a journal entry.

Example from OpenStax: an amount recorded wrong

Check 5386 paid $2,000 of dues but went into the books as $1,760. OpenStax says this "resulted in an error of $240 that must be deducted from the company's book balance", and among the entries that follow the reconciliation it lists: "The third entry is to adjust the recording error for check 5386." In plain terms, the correcting entry adds the missing $240: $240 more dues expense and $240 less cash. Afterward, the books show the full $2,000 that left the bank.

Sample: a bill entered twice

These figures are a sample for a fictional business.

A $185.00 software bill, paid from the business account, was entered twice. The books show $370.00 of software expense, and book cash is $185.00 lower than the bank balance.
The fix is one entry for $185.00 with the duplicate's sides reversed: debit cash $185.00 and credit software expense $185.00.
After the fix: $370.00 − $185.00 = $185.00 of software expense, which matches the one bill, and book cash goes up by $185.00.

Keep a record of the change

OpenStax's internal controls section describes a cash-handling control. For "a mistake involving cash, such as making an error in a transaction on a cash register," it says "the employee who made the mistake typically cannot correct the mistake. In most cases, a manager must review the mistake and clear it before any adjustments are made." Those corrections are logged so that a pattern pointing to collusion can be spotted. OpenStax gives this for cash handling, not for bookkeeping corrections. Carried over to your own books, the idea is to note what you changed, when and why, keep the document that shows the right amount, and leave the original entry visible instead of overwriting it.

If the error is on a tax return you already filed

For US federal individual income tax returns, IRS Topic No. 308, Amended returns (In the US (federal), last reviewed or updated September 24, 2026) says: "If you discover an error after filing your return, you may need to amend your return. The IRS may correct certain errors on a return and may accept returns without certain required forms or schedules. In these instances, there's no need to amend your return."

Refund deadline: "To claim a refund, you must file Form 1040-X within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later."
State returns: "A change made on your federal return may affect your state tax liability."

That topic is about Form 1040-X, the individual return. Partnership, corporate and non-US returns have separate rules; ask your tax professional which ones apply.

Who answers for mistakes on your tax return?

For a US federal income tax return, IRS Tax Tip 2025-11 (February 6, 2025) says: "Taxpayers are ultimately responsible for all the information on their federal income tax return, regardless of who prepares the return." It also tells taxpayers to "Review their tax return before signing it and ask questions if something is not clear or appears inaccurate."

The IRS recordkeeping page (In the US (federal), last reviewed or updated May 1, 2026) puts the proof on you as well: "The responsibility to substantiate entries, deductions, and statements made on your tax returns is known as the burden of proof."

Whether a bookkeeper, an employee or an outside accountant owes you anything for a mistake is a different question. It depends on your contract with them and the law where you are, and this page doesn't answer it. Ask a lawyer, or the body that licenses your accountant.

Preventing errors

The 8 tips for catching accounting mistakes page walks through the routine checks. The points below tie them to the errors above.

Keep the document behind each entry. The IRS recordkeeping page says: "Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. These documents contain information you need to record in your books." Duplicates and wrong amounts show up when an entry is compared with its document.
Reconcile each bank statement. Missing transactions, wrong amounts and the bank's own errors surface there. See what is bank reconciliation.
Use a separate business bank account, so the statement you reconcile holds only business transactions.
Split duties where you can. OpenStax: "The purpose of separating duties is to ensure that there is a check and balance in place." If you work alone, an accountant's review of your reconciliations is the second check.
Expect controls to reduce errors, not end them. OpenStax: "A properly designed internal control system will not prevent all loss from occurring, but it will significantly reduce the risk of loss and increase the chance of identifying the responsible party."

Where Billed fits

Billed's invoice software page (checked November 1, 2026) says: "Save your tax rates and settings once, and Billed calculates taxes automatically when you create invoices and estimates." It also says: "When a client pays by check or cash, record it as an offline payment so all your income is in one place." Software works from what you enter, though: a wrong rate or amount stays wrong until someone checks it against the document.

When this guide isn't for you

Small US businesses that keep their own books or use a bookkeeper are the audience here. If your company is audited, reports to investors or lenders under set accounting standards, or files outside the US, correction and disclosure rules can differ, so work through them with your accountant. For mistakes on invoices themselves, see invoicing mistakes to avoid.

Frequently Asked Questions

What types of accounting errors are there?

Amounts entered wrong or in the wrong column, transposed digits, transactions left out or recorded twice, and amounts posted to the wrong account. Some stop the books from balancing; others leave the totals equal and only show up against a document or a bank statement.

How do you correct an accounting error?

Find the document behind the entry, work out the difference, and record a correcting entry that brings the accounts to the right balance. Note what changed and why, and leave the original entry visible instead of overwriting it.

Can the books balance and still be wrong?

Yes. A transaction left out, recorded twice or posted to the wrong account leaves debits equal to credits. OpenStax says: "We can have errors and still be mathematically in balance."

What if I find an error after filing my tax return?

For US federal individual returns, IRS Topic No. 308 says "you may need to amend your return" with Form 1040-X, but also that the IRS "may correct certain errors" itself, so amending isn't always needed. For a refund, the same topic says: "To claim a refund, you must file Form 1040-X within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later."

Who is responsible if my accountant makes a mistake on my tax return?

For your US federal income tax return, the IRS says: "Taxpayers are ultimately responsible for all the information on their federal income tax return, regardless of who prepares the return." Whether the preparer owes you anything for the mistake turns on your contract with them and the law where you live, so ask a lawyer.

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How to Avoid Accounting Errors: Common Types and How to Correct Them