When you need to edit a previously recorded transaction in the accounting records, which of the following are the two primary methods used?

• A. Record an adjusting entry to correct the error
• B. Erase the original entry from the ledger
• C. Reverse the original entry and record a new, correct entry
• D. Ignore the error if it is immaterial

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the context of the problem. In accounting, errors in previously recorded transactions can occur, and it is important to know the proper methods to correct them. The goal is to ensure the financial records are accurate and comply with accounting principles.
2. Step 2: Learn about the two primary methods for correcting errors. The first method is to record an adjusting entry to correct the error. This involves creating a new journal entry that adjusts the accounts affected by the error without erasing the original entry.
3. Step 3: Understand the second method, which is reversing the original entry and recording a new, correct entry. This method involves creating a journal entry that negates the effects of the incorrect entry (reversal) and then recording the correct transaction.
4. Step 4: Recognize that erasing the original entry from the ledger is not a recommended practice in accounting. It violates the principle of maintaining an audit trail, which is essential for transparency and accountability.
5. Step 5: Note that ignoring the error if it is immaterial may be acceptable in certain cases, as immaterial errors do not significantly impact the financial statements. However, material errors must always be corrected using one of the two primary methods mentioned above.