The correction of accounting errors in previously issued financial statements, i.e., errors that arise from faulty data entry, omission, discrepancies, opposite-side recording, overestimation/ underestimation of figures, etc. This does not involve an adjustment of the carrying amount of an item (asset, liability, etc.) or the amount of asset depreciation/ amortization, etc., in view of any assessment/ re-assessment of factors such as expected benefits and obligations associated with assets and liabilities (as this all is prompted by, or is perceived to be, changes in accounting estimates).

Accountants must correct errors by means of “corrective”/ “correcting” entries right upon spotting such errors. This may take place by reversing an incorrect entry and introducing a new journal entry to record the transaction correctly, or by making a single journal entry for both the original, incorrect entry and the correct entry.