Balance sheet mistakes and how to prevent them

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As a business owner, you might sometimes make the
biggest blunder that involves your business
balance sheet. Mistakes in accounting are common
and can happen time to time. Even the accountants
and bookkeepers services can stable the
turbulence in the business plans. What is a
Balance Sheet? A balance sheet is a financial
statement that tracks your companys
progress. Your balance sheet consists of assets
and liabilities. Assets are what is owned by the
company and liabilities are what a company
owes. On your business balance sheet Assets
Liabilities Your assets must be equal to total
liabilities. If they dont match your balance
sheet is unbalanced. This depicts that there is
some kind of mistake. Your balance sheet is an
indicator of business current and future
health. If you want to avoid errors on your
balance sheet, scroll down to read more. The
most common balance sheet mistakes 1. Omitting
transactions Sometimes, you may miss to record
a transaction on the balance sheet. Omitting
accounting transactions is a very common and
fixable mistake.
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• You might forget to record transactions like
  petty cash, inventory, supplies and other
  expenses.
• To prevent this error - you may want to set up a
  reminder to record transactions on a monthly
  basis.
• Recording transactions incorrectly
• This is yet another common mistake made by
  businesses. They incorrectly record the
  transactions and invert the numbers also known as
  transposition errors.
• A transposition error is when you reverse the
  order of the number while recording a
  transaction. Like for say, 45 is incorrectly
  written as 54.
• This error is easy to scratch off. To avoid this
  error, make sure you double check any numbers
  you put in your balance sheet. You can ask
  another employee to cross check the transactions
  recorded.
• Forgetting to record inventory changes
• Another common mistake that can take a toll on
  your business balance sheet is forgetting to
  record inventory changes. Some businesses forget
  to tally and update their inventory levels at
  the end of each period. To prevent this error.
  Keep in mind to update your inventory at the end
  of each period. This way your inventory is
  up-to-date in your records.

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• When youre recording transactions on the balance
  sheet, make sure to classify each transaction
  correctly as assets and liabilities. If you dont
  correctly classify your transactions, you may
  end up with sheet blunder. To prevent this
  error, make sure youre classifying each
  transactions correctly as assets (physical and
  non-physical properties that adds value to your
  business such as petty cash, inventory, accounts
  receivables, business computer, car, trademarks
  etc. and liabilities (current debts owed by
  businesses to other companies such as supplies,
  invoices, loans, mortgages, accounts payable
  etc.)
• Double check with your bookkeeper or an
  accountant to make sure you classify each
  transaction correctly.
• Also Read Accounts Payable
• Data Mayhem
• Balance sheet gives data about what company owns
  and what it owes. A small error in entering data
  in the sheet can affect the balance sheet. The
  error could include wrong decimal for example,
  499.99 entered as
• 4999.9
• Another mistake could be not following the
  currency rate. You make thousands of entries on
  the sheet, spotting these small mistakes is a big
  deal. The errors are considered minor but their
  effects are major. So be wide awake when
  preparing the balance sheet. Cross-check, triple
  check to ensure there are no mistakes.
• Isolation from chronology
• This is a rare error but very critical to an
  accounting process. It is vital to arrange the
  data in the balance sheet in the actual sequence
  but many

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• dont take this seriously. The randomness on the
  balance sheet has a chance of you missing out on
  some vital data. So to prevent this error, keep
  the receipts and bills safely so that the balance
  sheet can be updated correctly.
• Lagging with technology
• Modern technology is highly in demand in the
  market but some businesses and accountants stick
  to traditional mediums. This explains why some of
  the businesses struggle with the balance sheet.
  Switching to accounting softwares may help you
  avoid errors. These softwares give updates in
  real- time and help you avoid any mistakes on
  the balance sheet.
• Following are the ways to PREVENT common balance
  sheet mistakes
• Pinpoint any problems ASAP
• Review recorded transactions on balance sheet
  periodically
• Keep financial documents organized
• Conduct a trial balance before creating your
  balance sheet.
• Conclusion
• As soon as an error is detected, rectify it
  immediately. When it comes to balance sheets,
  the more organized you are the better. The best
  thing as a business you can do is to be
  proactive and keep detailed financial records
  for references. If you figure out the mistakes
  early, it becomes easier to address and prevent
  them. It is recommended for you to appoint a
  Financial Preparation professional to carry out
  the accounting procedures for your business.

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