Correct Transactions Recorded in the Wrong Year
A transaction entered in the wrong year can shift income, expenses or balances between reporting periods. Review the underlying documents and the accounting method before changing the date. The bank posting date alone does not always determine the correct year, particularly when accrual accounting or special tax rules apply.
Establish which date the entry represents
An invoice date, service date, payment date and bank clearing date can all differ. Cash accounting generally focuses on receipt and payment, while accrual accounting generally focuses on earning income and incurring costs. IRS Publication 538 explains those principles and their exceptions. Keep the original documents so the decision reflects the transaction rather than a preferred profit figure.
Consider every record linked to the entry
Changing an invoice date may affect receivables, sales reports and tax summaries. Changing a bank transaction date can affect a previously completed reconciliation. Check related payments, credits and imported entries before editing. A correction may require adjusting linked records, not just moving one line in a report.
Coordinate changes to a year already filed
If the tax return was filed or final financial statements were issued, give the tax preparer or responsible accountant the details before changing the closed period. They determine whether a return correction or a particular accounting adjustment is needed. Preserve an explanation of the error and a copy of the affected reports. The purpose is an accurate timeline, with a visible record of how the mistake was resolved.