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ekuemoah
08-31-2012, 05:38 PM
I closed my books for the month. I noticed a month later that I had expenses for the month I closed that were not recorded in the month in which they were incurred. How do I journalize these expenses...

Do I record it in the current month(the month it was discovered)?If I do this, the expenses for the current month will be overstated and the expenses for the month in which it was incurred will be understated. This will lead to an error in the income for the period and inaccurate taxes.

Should I keep the amounts in a separate account called unrecorded expenses and then at the end of the quarter or year, include it as other expenses and use it to recalculate the net income for the quarter?

What do I do if I already sent in my income taxes for the quarter and this newly discovered amount makes the taxes inaccurate?

jamesray50
09-03-2012, 02:43 PM
Do you do your books on an accrual basis? Did you pay for the expenses the previous month or just incur them? You can do a journal entry to debit the expense and credit accounts payable for the previous month and reverse the journal entry the current month, or debit accounts payable when you pay the expense. If you have distributed financial statements, you can restate them with the correct expenses recorded. If you are not producing financial statements for anyone other than you, I wouldn't worry about restating them. I'm not sure what you mean when you say your taxes will be incorrect. If you are paying estimated income taxes, this amount is not based on your current earnings but prior year's (I think - I don't do taxes). Whatever you have paid in taxes will be reflected on your tax return, I wouldn't worry too much about overpaying a little bit. Hope this helps.

Evan
09-03-2012, 05:49 PM
If I do this, the expenses for the current month will be overstated and the expenses for the month in which it was incurred will be understated. This will lead to an error in the income for the period and inaccurate taxes.
Why are you reporting to that you need to have accurate financial information on a monthly basis. Most small businesses pay taxes on a quarterly basis, unless you're large enough to pay on a monthly basis... But if that's the case, I wouldn't expect the business owner to be doing the accounting and asking questions like this on a forum.


What do I do if I already sent in my income taxes for the quarter and this newly discovered amount makes the taxes inaccurate?

How much is it off for it to be "inaccurate"?

Also, considering the month ended on a Friday, most company's take about a week to close all of their books and records for the previous month, sometimes sooner. The fact you did it so quickly is why it's more prone to error.