How to correct a journal entry
Journals usually go wrong in a few familiar ways: the wrong account, the wrong amount, the sides swapped, the wrong date or the same entry twice. Each has its own fix, and a good fix leaves the original visible beside it.
- By Book Keeping Pros
- Sources checked 15 Oct 2026
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Key takeaways
- Write down what the journal should have been before changing anything, so the correction targets the real difference.
- Reversing the wrong journal in full and posting a correct one leaves the clearest trail; a single correcting entry for the difference also works for a simple error.
- A journal posted with its debits and credits swapped needs a correction of twice the amount, or a full reversal followed by the right entry.
- The ATO's record-keeping rules bar changing what a record says and call for records to be stored where they are safe from change or damage.
- Correcting a period that has already been reported on, or a financial year already closed, is a question for your accountant.
Pin down what went wrong
Set the journal as posted beside the journal as it should have been, line by line. The difference between the two is what the correction has to achieve. Skipping this step is how a correction ends up making a second error.
| Error | Effect on the ledger | Usual fix |
|---|---|---|
| Wrong account | One account too high, another too low | Move the amount from the wrong account to the right one |
| Wrong amount | Both accounts out by the difference | A correcting entry for the difference, or reverse and post again |
| Debits and credits swapped | Both accounts out by twice the amount | Reverse the journal, then post it the right way round |
| Posted twice | Both accounts overstated by the journal's amount | Reverse the duplicate |
| Wrong date | Right accounts, wrong period | Reverse in the wrong period and post in the right one, if both are still open |
| Should never have been posted | Balances changed for no reason | Reverse it in full |
Illustrative example only: these rows show the method and are not sourced data.
Two ways to correct it
- Reverse and post again: a new journal with every line of the original on the opposite side cancels it completely, then a fresh journal records what should have happened. This is the clearest method for anything beyond a simple slip.
- Correcting entry: one new journal for the difference only. It suits a simple wrong amount or wrong account, but the reader has to add the original and the correction together to see the result.
Either way, the original stays in the books, which sits well with the ATO's rule against altering the relevant information in records. Correcting with new entries keeps the original and the fix side by side, so anyone reading the ledger can see both.
Worked example: the sides swapped
A month-end accrual for electricity was posted the wrong way round, so it reduced the expense and showed the business as being owed money instead of owing it.
| Journal | Account | Debit (AUD) | Credit (AUD) |
|---|---|---|---|
| Original, as posted | Accrued expenses | 410.00 | |
| Electricity | 410.00 | ||
| Reversal of the original | Electricity | 410.00 | |
| Accrued expenses | 410.00 | ||
| Correct entry | Electricity | 410.00 | |
| Accrued expenses | 410.00 | ||
| Total | 1,230.00 | 1,230.00 |
Illustrative example only: these rows show the method and are not sourced data.
After the reversal and the correct entry, electricity carries the cost and accrued expenses carries the amount owed. A single journal for the same amount as the original would only have cancelled the mistake, leaving the accrual out altogether.
Worked example: the wrong amount
A journal moving a software subscription out of advertising had its digits typed in the wrong order. The quickest fix is a correcting entry for the difference.
| Journal | Account | Debit (AUD) | Credit (AUD) |
|---|---|---|---|
| Original, entered as 1,250.00 instead of 1,520.00 | Subscriptions | 1,250.00 | |
| Advertising | 1,250.00 | ||
| Correcting entry for the difference | Subscriptions | 270.00 | |
| Advertising | 270.00 | ||
| Total | 1,520.00 | 1,520.00 |
Illustrative example only: these rows show the method and are not sourced data.
Between them, the original and the correcting entry move the full subscription cost, and the ledger shows both, so the slip and its fix can be traced.
Describe the correction
A correcting journal needs a fuller description than most. Say which journal it corrects, by number and date, what was wrong, and what the correction does. Attach whatever proves the right figure, such as the supplier's bill or the meter reading.
For a company, the Corporations Act's definition of financial records includes documents of prime entry and the working papers needed to explain adjustments made in preparing financial statements.
Which period the correction belongs in
If the period of the original journal is still open and nothing has been reported from it, correct it in that same period, so the period's figures come out right.
If reports for that period have already gone to the owner, a lender or anyone else, or the financial year has been closed, the right approach depends on the size of the error and what was reported. That is a question for your accountant, who may want the correction posted in the current period or handled as part of their year-end adjustments.
Check the result, then look for the cause
- Run the ledger accounts involved and confirm each now shows what it should.
- Re-run any reconciliation the original journal affected.
- Ask why the error happened. A recurring journal set up wrongly will repeat the error every month until it is fixed.
The ATO's advice to look for mistakes whenever figures fail to add up applies here too: one wrong journal is a reason to check others prepared the same way.
General information
Sources
- Overview of record-keeping rules for business
Australian Taxation Office. Current at 18 June 2026 (QC60718), released 18 June 2026. Checked 15 October 2026.
© Australian Taxation Office for the Commonwealth of Australia Licence: ATO website copyright notice (copy, adapt and distribute, without implying ATO endorsement).
- Record-keeping tips
Australian Taxation Office. Current at 25 October 2022 (QC70730), released 25 October 2022. Checked 15 October 2026.
© Australian Taxation Office for the Commonwealth of Australia Licence: ATO website copyright notice (copy, adapt and distribute, without implying ATO endorsement).
- Corporations Act 2001, sections 9 and 286
Federal Register of Legislation, Office of Parliamentary Counsel. Compilation No. 149, 19 September 2026, released 19 September 2026. Checked 15 October 2026.
Based on content from the Federal Register of Legislation at 15 October 2026. For the latest information on Australian Government legislation please go to https://www.legislation.gov.au. Licence: CC BY 4.0.
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