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If you start to hunt for the error that created a discrepancy on the Balance Sheet or Income Statement without determining the month when the error occurred, you are going to waste a lot of time.
| 1. | Run the Balance Sheet/Income Statement for the previous month. Is a discrepancy still showing? If so: |
| • | Record the amount of the discrepancy. |
| • | Note whether the amount of the discrepancy is the same. |
| • | Go back another month and repeat step 1. |
| 2. | When you find the first month that is correct, you can be certain that an error occurred in the earliest month that showed a discrepancy. If you only went back one month, or the discrepancy remained the same as you went back, the only error is in the earliest month. If the discrepancy changed as you went back, there are multiple errors. |
| 3. | When you have isolated the month, you should use the summary journals and month end closing procedures to hunt for the error. |
| 4. | If there are no months in the current year that are correct, you need to look at the beginning balances and compare them with the balance sheet for the previous year. |
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