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Confused by CPA's journal entry

I'm confused by an entry a CPA made prior to my time with this organization. During the 2014 fiscal YE close, the external CPA provided and advised in house accounting to create a journal entry purposed with correcting a recording error relating to receivables. Below is a recreation (#'s used for illustration only, however effects are same) of the journal entry that was created for FYE 2014, again with the purpose of correcting a recording error that couldn't easily be identified by in house accounting. 2015 Cr) cash:1200 Dr) clearing acct: 1200 2014 Dr) cash: 400 Cr) clearing acct: 400 2013 Cr) cash: .01 Dr) AR: .01 2010 Dr) Cash: 799 Cr) AR: 799 The difference between the 2015, 2014, 2013 entries. The 799 is show up again for FYE '15 and I'm afraid it's going to show up in '16. My initial thoughts were this could potentially be a retrospective treatment of a change in GAAP, relative to revenue reporting, however I've not been able to find evidence in the financials supporting this theory, nor has old email correspondence with the CPA alluded to this. Furthermore emails to the CPA that questioned the effect of the entry provided no clear answer or purpose- just a glossing over of how it would fix the 2014 error. Since the $799 continues to surface at YE, my thoughts are something is truly amiss with this entry- booked across multiple reporting periods. Does anyone have any thoughts or best guesses as to why this type of entry was created as well as ideal solutions for how to go about fixing it so the balance stops carry over year-to-year. Many thanks in advance for your replies.


Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

Cash is cash so probably best to start there. Go to the bank reconciliation and see if someone recorded cash in transit before it actually posted. That is what this looks like it relates to. Look at A/R and see if anything aged is on there. Look at the clearing account and see if there are stale items there. Trace all the entries in that clearing account to the other side of the entry which will help clarify the intent of the entries also.


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