While writing the figures and amounts into your
records, the chances of making mistakes and errors are higher. These chances
become even higher when the accountant or the bookkeeper becomes careless.
Among many other accounting mistakes, one of the most common mistakes is the
transposition error.
Transposition error occurs in the financial records when the record keeper swaps the figures or the digits. For example, writing 565 instead of 556 is a transposition error. These errors are very difficult to identify, resulting in serious business problems if not handled on time.
Keep scrolling down the article to know some serious
impacts of transposition errors and tips to avoid these errors.
Effects of Transposition Error on Accounting Records
Finance and accounting are the departments of any
organization where mistakes are very troublesome and could result in serious
damages. That is why it is always suggested to record your amounts and finances
with great care with the help of professionals.
Below are a few impacts of transposition errors on
your financial records.
1. Imbalance
sheets
One of the biggest impacts transposition errors leave
on accounting records are the balance sheets and trial balances. When you write
the different amounts in the credit and debit section, it becomes difficult to
balance the sheets. This is because your debits must be equal to your credits
for balancing the sheets. If you have made this error either in debit or credit,
then it is easy to find. But if these errors occur both in the credit and debit
accounts, then it will be difficult to correct them. That is why it is
important to avoid these mistakes for having error-free accounts. You can hire
the bookkeeping and accounting firms in Dubai to have correct records and balance
sheets.
2. Higher
tax rates
Transposition errors could result in a number of
losses for a business. Among them, one of the biggest losses is paying huge
amounts of tax. For example, if an accountant or bookkeeper mistakenly records
net income as 76,550 instead of 75,650, then a business has to pay a higher tax
on their income instead of paying the amount they owe. Most tax mistakes occur
because of these transposition errors.
3. Wrong
financial decisions
Transposition errors result in wrong financial records
and statements. These financial records are very important for businesses
because based on these records, they make future decisions. These decisions
could be either for their investments or about the payments to their
shareholders. If the developed statements and records contain errors, then it
means that the decisions made are also incorrect. One mistake could lead to
many bad decisions for organizations; that is why it is important to avoid such
mistakes.
Top 4 Tips To Avoid Transposition Errors
There needs to be certain methods and strategies to
avoid these mistakes from happening. Because of these mistakes, you will not be
able to make any good decisions for your business and its future.
Below are a few effective methods for avoiding these
mistakes in your financial records.
1) Avoid
manual methods
The occurrence of these mistakes is because of the
manual methods used for making the entries and record keeping. That is why it
is preferred to use technical resources for save and error-free recording of
these numbers. You can go for manual methods if the people on the jobs are good
with numbers and have years of experience.
2) Go for
bank reconciliation
One of the very useful methods in identifying any kind
of accounting error is bank reconciliation. Bank reconciliation methods include
a comparison of the financial statements and records to check for any
discrepancies and imbalances. Therefore, before making decisions based on the
developed records, it is very important to compare them. These comparisons will
help you identify the imbalances and incorrect figures.
3) Double-entry
bookkeeping methods
For ensuring the accuracy of the financial statements,
double-entry bookkeeping methods play a significant role. This method is based
on recording every record twice while recording a debit amount for every credit
amount. Then, if you make any mistakes in the credit accounts, you can correct
these mistakes by looking at the figures mentioned in the debit accounts. That
is why it is always suggested for businesses to go for this method to avoid
account imbalances and discrepancies.
4) Expert
bookkeepers and accountants
The biggest reasons for the occurrence of these mistakes are the negligence of the accountants. Therefore, you must make sure that the bookkeepers and accountants you hire are experienced and professional. Their professionalism will help you avoid such disastrous mistakes and help you develop accurate financial statements. You can hire professional bookkeepers to avoid these mistakes and errors in your records.
Make your account records free of
errors with expert help!
If you want to make better organizational and business
decisions, then you must make sure that the records based on which you are
making these decisions are correct. Incorrect records lead to incorrect
decisions. That is why always have expert help to record these critical aspects
of your business.
