The Advantages of Auditing Journal Entries Before They Hit the GL
Accounting mistakes are costly. In fact, did you know that manually inputting incorrect data into an enterprise system is the number one accounting mistake that costs companies billions1? Now, imagine you had the ability to not only identify these costly mistakes but to prevent them – allowing you to spend the time and money it would have taken to fix these mistakes growing instead of maintaining your business. NorthScope can help make your imagination your reality.
NorthScope allows you to view the journal entry that will be created by a transaction before it is posted using the Journal Details window. The Journal Details window displays both the journal entry and the journal details. The journal details provide you the unsummarized debits and credits created from the transaction and allow you to view where each account being debited and/or credited was pulled from, based on the accounting rules, as well as the line type and description. This information allows you to trace the source of each accounting effect resulting from the transaction. Therefore, if there are any errors, such as the wrong account being debited or credited for a vendor, you can easily navigate to root issue and fix it before posting, such as correcting the vendor’s account setup.
Read below to learn about how NorthScope’s tools for auditing journal entries before they’re posted can help you and your business avoid costly accounting errors.
Allows You To Be Proactive not Reactive
Identifying journal entry errors before they are posted is more cost effective and time efficient. By allowing you to fix the source of the error before the journal entry hits the GL, this process prevents duplicate errors in the future and ensures the journal entry will be posted correctly the first time without needing a correction after posting, which takes more time and effort.
Helps You Avoid the Most Common Accounting Mistakes
The most common accounting mistakes are transposition errors, errors of principle, errors of omission, and errors of commission2. These mistakes are due to numbers being transposed, transactions being recorded against accounting principles, transactions being missed in part or in whole, or incorrect entries being posted. Each of these mistakes are either easily identifiable or preventable using the Journal Details window.
- Transposition errors: By displaying debits and credits with their corresponding item sources resulting from a transaction in the journal details, NorthScope allows you to identify incorrect values and fix them directly on the transaction, which will update the corresponding journal entry, before either are posted.
- Errors of principle: By displaying the account source of each debit and credit that affects a transaction’s journal entry, NorthScope allows you to easily recognize when an accounting principle is not being upheld, thus allowing you to take necessary action to adhere to the accounting principles before anything is posted.
- Errors of omission: By displaying the unsummarized debits and credits that make up the journal entry, NorthScope gives you visibility to all monetary effects being taken into account, allowing you to easily identify when a component, such as a tax, is missing.
- Errors of commission: By allowing you to view journal entries before they are posted, NorthScope allows you to fix any incorrect entries before posting, thus preventing this common mistake.
Provides You With Better Traceability
Unfortunately, even with the best tools mistakes are bound to happen. Therefore, it is likely that erroneous journal entries will still be posted. Fortunately, NorthScope’s Journal Details window can still be accessed on posted transactions, providing traceable evidence as to how each posted journal entry was created so that when an error is found in auditing, it can be pinpointed more easily by simply following the trail provided by the journal details.
For more information on how NorthScope’s Journal Details window can help you audit journal entries, click here.