There are various methods by which specialists can control the primary accounting documents. However, from time to time, when reflecting certain data, various kinds of inaccuracies arise. Let us further consider how the correction of errors in accounting and reporting is carried out.
General information
Accounting errors are an incorrect reflection or non-reflection of certain facts of economic activity of an enterprise. It is impossible to completely prevent the likelihood of their occurrence. However, it is quite possible to take timely measures to identify errors in the accounting (financial) statements and eliminate their consequences. It must be remembered that all detected inaccuracies are subject to correction.
Normative base
Primary accounting documents are prepared in accordance with the Instructions and Regulations (PBU). Since 2010, PBU 22/2010 has been in force. He established the procedure for correcting accounting errors and the conditions for disclosing information about inaccuracies in documents of legal entities, except for credit companies, municipal and state institutions.
Causes of Incorrect Information
According to RAS 22/2010, typical errors can be caused by:
- inaccuracies in calculations;
- unscrupulous actions of officials conducting accounting at the enterprise;
- incorrect classification or analysis of the facts of economic activity of the organization;
- incorrect implementation of the accounting policies of the company;
- improper use of information available at the time of signing the papers;
- incorrect application of the rules of law that govern accounting.
Classification
The following types of accounting errors exist:
- Counting defects. These are flaws that are associated with incorrect calculations or incorrect entry / transfer of information in registers.
- Defects resulting from untimely recording of primary documentation. Such shortcomings appear, as a rule, due to the lack of coordination in the work of units. Signed documents often just do not get into bookkeeping on time. Papers may be delayed by counterparties. In this case, their non-reflection will not be considered erroneous.
- Deficiencies arising from improper application of the law. Such errors are the result of violations of the rules for maintaining securities and disclosure of information in them.
In addition to the above, deficiencies may result from the provision of inaccurate, inaccurate, incomplete data. These errors can be either unintentionally or deliberately committed. In the latter case, thus, some enterprises try to hide the facts of unlawful behavior. It can be, for example:
- overestimation of the amount of material being written off in accordance with various bases (theft of raw materials);
- failure to submit cash orders by the responsible employee, followed by non-reflection of cash receipts to the organization’s cash desk (fact of financial fraud).
Exceptions
Omissions or inaccuracies are not considered errors when reflecting facts of economic activity in the financial statements or accounting, revealed as a result of receiving new data that were not available to the enterprise at the time of the introduction (non-entry) of information about the relevant operations. Changes in estimates will not be recognized as deficiencies. In particular, we are talking about reserves:
- for the depreciation of cash investments;
- on doubtful debts;
- under depreciation of the MPZ.
All estimated values are not included in the balance sheet. They correct only certain of its indicators.
Defect Detection Methods
For the timely detection of errors in financial statements and accounting it is recommended:
- Carry out a regular inventory of existing property and the company's obligations, including reconciliation of settlements with counterparties.
- Analyze all the data contained in accounting registers. In particular, within the framework of these measures, the comparability of parameters by period is checked (the correspondence of income and expenditure levels is assessed).
- Check non-standard wiring and large operations.
- Compare reporting indicators - perform arithmetic-logical control.
Ways to correct accounting errors
Adjustments can be made by the following methods:
- Partial. Correction of errors in accounting and reporting in this case is carried out by additional posting, supplementing or reversing previously performed operations solely by the amount of positive or negative difference.
- Complete. In this case, the method of reversal of all operations carried out earlier is used with the subsequent presentation of the correct data.
When using any of the above options, you should make comments with links to those papers for which adjustments are made. For the identified deficiency, an accounting statement is prepared to correct the error.
Criteria Affecting Adjustments
Correction of errors in accounting and reporting is carried out by one method or another, depending on the degree of significance of the defect. For this indicator, two categories of defects are distinguished. Errors may be material or non-material. The criteria by which defects are classified in the first category should be indicated in the relevant papers. A significant error in accounting is such a flaw that, alone or in combination with other defects, can affect the economic decision of interested users in one period, which is adopted by them on the basis of financial data presented for this period of time. The criteria directly indicating the degree of significance are determined by the enterprise itself. The organization in this case proceeds both from the size and from the nature of the relevant articles (articles). The position in the financial policy of the enterprise can be formulated as follows:
"A mistake should be considered significant if it provokes a distortion of the reporting indicator by more than 10% of the accepted currency or indicator value."
Defective period
This criterion also affects the rules in accordance with which the correction of errors in accounting and reporting is carried out. In particular, shortcomings may be:
1. This year, identified:
- until its completion;
- after it ends, but before the reporting is completed.
2. The previous year discovered:
- after signing the papers, but until the moment they are submitted to interested parties;
- after submission to users, until the approval of reporting;
- after the approval of the papers.
Interested people
These include:
- LLC participants.
- State authorities, local governments and other authorities authorized to exercise the rights of the owner.
- Shareholders of AO.
Special cases
Regardless of the degree of significance:
- Correction of errors in accounting and reporting identified before the end of the current year is carried out by marks corresponding to the accounts in the month in which they are found.
- Correction of deficiencies established at the end of the year before the signing of the securities is carried out by records for December of the year in which they are drawn up.
These provisions mean that no matter how significant the errors that were made in the preparation of the quarterly interim reporting, they are not reviewed. If in the II quarter. the enterprise will discover a significant flaw that appeared in the 1st quarter, changes that will be caused by its adjustment will be reflected in the papers for 6 months (9 months, a year) and will not affect the indicators for the 1st quarter.
Features of eliminating minor flaws
If, after signing the statements, the accountant reveals an error that is not considered significant, according to the current accounting policy of the enterprise, and was made in the previous period, then according to paragraph 14 of PBU, it is adjusted by marks on the corresponding accounts in the month when it was discovered. Losses and gains resulting from the elimination of the deficiency are included in other expenses or income for the current period.
For instance:
“In January 2011, the company acquired and immediately used stationery, without reflecting these operations in accounting. This defect was identified in November 2012. In this case, the accountant makes an error statement. The correction is reflected in the November papers as follows:
Debit ct. 10.9 "Household supplies and equipment."
Credit account for fixing settlements (76, 73, 71, 70, 62, 60).
Reflected the adoption of stationery in accordance with the invoice No. 101 of January 20, 2011.
The debit of the account for fixing expenses (44, 26).
Credit account 10.9 " Household supplies and equipment."
Shows the use of goods for office use in January 2011.
Debit ct. 91.2 "Other costs".
Credit account for cost accounting (44, 26).
Losses for 2011 are shown, which are associated with untimely indication of business transactions for the acquisition and subsequent use of office supplies (January 2011, invoice No. 101 of January 20, 2011). "
Important point
Subjects in the field of small business, in addition to issuers of publicly available securities, have the right to correct errors in accounting and reporting that are recognized in accordance with the financial policy of the enterprise as significant, made in the previous annual cycle and identified after the approval of securities for the current year, according to the specified Above diagram without retrospective recount. This provision is fixed in PBU 22 (paragraphs 2, paragraph 9). The organization’s financial policy should include a clause on whether the company will use this opportunity.
Features of the correction of significant gaps
The procedure for correcting such errors will depend on the period in which they were discovered. So, a significant shortcoming of the past year, revealed after signing the papers for the current period, but before being presented to interested parties, is adjusted in accordance with paragraph 6 of PBU 22. In particular, the accounting statement on the correction of the error indicates the elimination of it by marks on the corresponding accounts for December this period. If the papers were provided to some other users (handed over to the IFTS, statistical agencies and others), then they must be replaced by those in which a significant defect is corrected. Such reporting is called revised. A defect recognized as significant, made in the past year and identified before the securities were provided for the current year to interested parties, is also adjusted in accordance with paragraph 6 of RAS. The responsible employee will need to check the balance. The revised forms disclose the following information:
- that these papers completely replace the previous ones;
- about the reasons why it became necessary to check the balance sheet and draw up a new one.
Revised papers are sent to all addresses to which previous ones were sent. A significant error of the previous period, discovered after the approval of the annual reporting, is corrected by marks on the corresponding accounts in the current period. The corresponding account in this case is sc. 84 "Uncovered loss (retained earnings)."
Recalculation of comparative indicators
It is carried out by correcting the elements of reporting as if the error of the previous period was never made. This method is called retrospective recounting. It is carried out with respect to comparative indicators from the previous period when the deficiency was made. In other words, if an inaccuracy occurred in 2011, but was discovered in November 2012, then in the 2012 statements, the indicators are recalculated as of December 31, 2011. Moreover, the elements as of December 31, 2012 will contain the corrected information. The exceptions are cases when it is not possible:
- establish the relationship of this inaccuracy with a specific period;
- assess the impact of the deficiency on a cumulative total in relation to all previous reporting periods.
Special requirements
It is necessary to pay attention to the fact that when correcting a significant inaccuracy of the previous period, found after the balance lines were approved, they are not subject to replacement, revision and resubmission to interested users. If a flaw was made before the earliest period of the securities presented for the current year began, the opening balances of the corresponding items of liabilities, capital, and assets are adjusted. Currently, it is customary to reflect in the financial statements indicators at the end of the two previous years. Thus, if an inaccuracy was made in 2009, but discovered in 2012, the opening balance is recalculated at the beginning of 2010, 2011 and 2012. The information received will be reflected in the explanatory note attached to the statements for the last specified year. If it is impossible to determine the effect of a material error on one or more of the previous periods that are presented in the statements, the enterprise needs to adjust opening balances for certain items. These include capital, liabilities and assets at the beginning of the earliest period for which a translation is possible. The impossibility of establishing the effect of a material error on the previous reporting period exists if you need numerous or complex calculations, in the performance of which it is impossible to isolate information about the circumstances that existed at the time the deficiency appeared, or you need to apply the information obtained after the approval of the reporting.
Disclosure
According to the requirements of paragraph 15 of PBU, an explanatory note to the financial statements for the annual activities of the enterprise must contain certain information regarding significant errors of previous periods eliminated in the current cycle. In particular, the papers shall indicate:
- The amount of adjustment for each article is as much as practicable for each previous period.
- The nature of the error.
- The amount of adjustment for basic and diluted earnings (loss) per share. The indicator is indicated if the company is obliged to disclose information on profit per share.
- Amount of change in opening balance for the earliest of the provided reporting periods.
If it is impossible to determine the effect of a significant inaccuracy on one or more of the previous cycles that are reflected in the papers, then the explanatory note should disclose the reasons that caused this circumstance. Along with this, you should also indicate the method of making adjustments for a material error, as well as the period from which the changes are recorded.
Example
In September 2012, it was revealed that in 2010 there was no revaluation of the principal debt on long-term loans and loans purchased by the company in foreign currency. In the process of calculating the exchange rate difference from the amount of these obligations at the exchange rate for 2012, the accountant received a negative difference. This defect is considered significant, the organization does not act as a small business. The indicated error entailed:
1. The distortion of the sum of indicators on the size of the negative exchange rate differences in the following articles:
- the amount of borrowed funds is underestimated (line 1410);
- the amount of retained earnings is overestimated (line 1370).
2. The distortion of the sum of indicators by the amount of excessively calculated income tax from the size of the exchange rate difference:
- unallocated profit is underestimated (line 1370);
- short-term debt is overstated by the amount of income tax (line 1520).
A retrospective recalculation is required for December 31, 2010 and December 31, 2011. In the enterprise accounting for 2012, the following entries are made:
Reflection of the negative difference arising from the revaluation of long-term loans and credits for 2012:
Debit ct. 84 "Uncovered loss (retained earnings)."
Credit account 67 "Calculation of long-term loans and credits."
Overly calculated income tax with a negative difference for 2010:
Debit ct. 68.4 "Income tax" (in the absence of a credit balance on this account, the enterprise will have a tax (deferred) asset - debit account 09).
Credit account 84 "Uncovered loss (retained earnings)."
Finally
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