1. Summons a month of deposited items and/or deposit tickets.

2. Note any deposited items not included in the sales journal.

3. Note any repair order listed in the sales journal not deposited.

4. Contact the customers located above by using the name and address on the repair order and request all cancelled checks written to the business and not deposited to the business account.

5. If the check was cashed at a check casher, their records can be summoned. If there is another bank account, or checks were cashed at a bank, the bank record can be summoned.

Journal Entries

Adjusting journal entries affecting income and expense accounts should always be examined carefully to ensure their propriety. Errors can and do occur and are occasionally subject to less than diligent review. While not commonly encountered, one of the largest income adjustments discovered among the cases examined in this study was the result of such an erroneous journal entry and is discussed here for that reason.

The entry was made in the process of converting accrual basis books to cash basis for tax purposes. To effect the change it was necessary to adjust the revenue accounts for beginning and ending receivables and deposits and the expense accounts for inventories and payables. The tax provision and the retained earnings accounts then required adjustment based on the variations in the income and expense accounts.

The trial balance was done on a computer spreadsheet and included some unnumbered and untitled entries inserted at the closing. One such entry immediately followed unearned deposits, which were treated as current income for tax, but not financial statement purposes. The trial balance, in part, is illustrated as follows.

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Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Glossary