Why not change the closed period?
A closed period is a number other things already depend on. The bank reconciliation, the report you sent, a sales tax return, the opening balances of the next month. Change one transaction inside it and all of those are quietly different from what was issued.
The correction belongs where it can be seen: in the open period, as its own entry.
How do I write the correcting entry?
Reverse what was wrong, record what is right, and say which entry you are correcting.
Example: in March, 12,000.00 of equipment was coded to supplies expense. You find it in June, in the same fiscal year, and March is closed. The entry, dated in June:
| Account | Debit | Credit |
|---|---|---|
| Equipment | 12,000.00 | |
| Supplies expense | 12,000.00 |
Memo: “Corrects March entry: equipment purchase coded to supplies.” Then start depreciating the equipment from the date it was placed in service.
The year’s totals are now right. March still shows what was reported for March, and June shows the correction.
When should I reopen the period instead?
Reopening is reasonable when all three are true:
- Nothing has been issued from that period: no statements, no filings.
- The error is large enough that the period’s numbers would mislead.
- You will run the close again afterwards, including the reconciliation.
Record that the period was reopened, by whom, and why.
What if the mistake is in a prior year?
The prior year’s income and expense accounts have already been closed into equity, and a tax return has probably been filed. Two cases:
- Small. Correct it in the current year, as above, with a clear memo. This is the usual treatment for errors that do not change the picture.
- Large. A material error in a prior year is corrected through opening retained earnings, not through this year’s income, and it may mean amending a return.
Do not decide the second case alone. Tell whoever prepared that year’s return, and decide together.
What should the trail look like afterwards?
Anyone reading the books later should be able to see three things: the original entry, the correction, and the reason. If they can only see the final number, the correction was an edit.
How does LedgerDock handle this?
A locked period cannot be changed. A database rule blocks deleting a sealed line or changing its amount, date or accounts. The correction is a new entry in the open period with your name on it, and if a period must be reopened, that takes a typed reason which is recorded too. See how a close works.