Accounting, whether we enjoy it or not, is crucial in almost any business environment. This is why so many programs at tertiary level require you to take at least one accounting course during your study. This can be particularly difficult for students who ‘don’t see the point’ or think that an accounting course is a ‘waste of time’. But even for those of you actually studying accounting, it is important to realise some of the key mistakes that are easy to make, but also easy to avoid – if you know how. In my time as a Studiosity specialist, many of the same issues seem to crop up again and again with accounting students.
1. Data entry errors
This error is probably the most common that I see as an Accounting Specialist. Often a student will log in to the Studiosity service at their wits end because their trial balance doesn’t balance, or their balance sheet is out. On many of these occasions the mistake has been made when entering figures into the appropriate sheet or set of accounts. The two most common errors when it comes to data entry are transposing numbers (59 instead of 95) for example, and either leaving off or tacking on an extra zero. Most commonly the students I work with are using some form of excel spreadsheet, but the key is in attention to detail. Data entry errors usually occur when the student is in a rush (leaving an assignment to the last minute for example).
How to avoid data entry errors
The best way to prevent data entry errors is to double check your figures at every stage of the process. As a student, one easy way to ensure the correct data entry is to print out your statements or spreadsheets, and then go through each one individually to check the accuracy of the figures that you have entered. Try reading it aloud when doing this – it can help identify errors that may be missed when simply skimming through a document on your computer screen.
2. General Ledger Journal Accounts
The questions that I get asked most commonly as a specialist by first year accounting students, revolve around the general ledger, and most commonly the classification of different items. Most often I find that students are in a rush to complete this section of their assignment, and move on to the ‘more glamorous’ income statement and balance sheet.
In my experience, more time spent on making sure the general ledger (or T accounts) are correct, pays huge dividends in the long run. A small error made here can have drastic repercussions when it comes to completing both the income statement and balance sheet. It is when these errors are made that it becomes very difficult to work backwards and find where that error originated.
The key things to remember when it comes to completing the general ledger accounts are the following:
Assets...
- are property the firm owns (cash, work in process, accounts receivable, furniture, buildings, etc.)
- increase in an asset account = debit / decrease in an asset account = credit
Liabilities & Equity...
- liabilities are the amount owed by the firm (accounts payable, line of credit, loans), equity is the shareholders investment in the firm (retained earnings, partners draws)
- increase in a liability or equity account = credit / decrease in a liability or equity account = debit
Revenue...
- income to the firm
- increase in a revenue account = credit / decrease in a revenue accounts = debit
Expenses...
- are operating costs of the firm
- increase in an expense account = debit / decrease in an expense accounts = credit
These four types of accounts can often trip students up, but by using the simple ideas here, classification of accounts and how to correctly record them becomes that much simpler.
These are the two most common things I see as a specialist at Studiosity. The key things to take away from this are:
- Take more time ensuring data entry is correct and,
- Take more time completing and ensuring the general ledger accounts are completed correctly
By using the ideas above, you can avoid these, and take some of the confusion out of general ledger accounts.
If you would like to connect to a specialist for help with your accounting, you can find out if you have free access to our service here.
