How to fix journal entries moving income to expense accounts
End-of-year journal entries moving funds from income into expense accounts and unclassified service revenue distort financial statements and risk compliance during CPA reviews. These misclassifications prevent accurate tracking of deferred revenue and leave internal staff unprepared when communicating adjustments to external auditors.
What people tried
Every workaround mentioned in the threads below. We haven’t tested any of them — and nobody here is claiming they worked.
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- 1Relying on annual CPA reviews to catch errorsDid this help you?
- 2Accepting non-compliant cash accounting methodsDid this help you?
- 3treating the invoice as an obligation and recording it as a liability until paidDid this help you?
- 4Making journal entries to move the debt out of accounts payable into its own liability accountDid this help you?
- 5Requesting loan statements and amortization schedules to reconcile principal and interest portionsDid this help you?
- 6Remapping booked revenue to actual ship dates to calculate the true financial and EBITDA impactDid this help you?
- 7Raising the issue multiple times to management despite initial pushbackDid this help you?
- 8Seeking reassurance and validation from peers online to feel betterDid this help you?
- 9Calculating materiality to determine if the error actually mattersDid this help you?
- 10Documenting the mistake, proposing a correction for the current period, and moving onDid this help you?
- 11Disabling AI bank-feed suggestions on everything except routine fuel and card spendDid this help you?
- 12Opening a dedicated bank account for deposits and creating explicit rules to code all incoming funds as depositsDid this help you?
- 13Walling off automation on deposits, progress draws, and supply-house statementsDid this help you?
In their words
Unedited, grouped by where they were said, most upvoted first within each place, each linked to the thread it came from.
“Typical post about being stressed because of an error I made a year ago and now want stories to make myself feel better.”source ↗
“Stressed because each month when reconciling it was one of those accounts where the balance hasn't changed so we automatically marked it as reviewed and reconciled.”source ↗
“Has anyone done this before? Company makes about $30mil in revenue. Not sure if I should care this much”source ↗
“I raised this before and got waved off.”source ↗
“The responses have been that it's been through two audits, that it's just a timing difference, and that shipment-based recognition may be harder operationally.”source ↗
“We have expired products being returned/adjusted, but there is **no physical stock movement**. We only have an invoice/document showing the value.”source ↗
“I just learn that our accountant was making an end of year journal entry to move funds from our income account to that expense account.”source ↗
“Secondly, I also learned that we have about $30,000 in service revenue, that should be classified as deferred revenue.”source ↗
“the only problem is, is that our accountant doesn't even know about the misclassification of the $30,000, so when she meets with the CPA who does our review, she is not going to know anything about this.”source ↗
“Yeah im trying to remind myself these types of mistakes happen to others. It's always the fear of thinking you are the one who "never makes mistakes" then all of a sudden they start to appear. But yeah will just have to expense the cost in full and take the hit”source ↗
“Jeez did that stress you out when you realized? But yeah i know it's a timing issue, I guess it always just comes back on making a mistake in the first place when you are usually seen as the person is really good at their job.”source ↗
“When we received the cash the entry was debit cash and credit accounts payable. There is no long term debt account, nor is there an interest expense account.”source ↗
“My question now is on what financial report would I see the balance due on that loan? It’s not on the balance sheet nor the trial balance.”source ↗
“i've had to untangle a couple contractor files where the AI kept coding deposits straight to income, it's a nightmare if no one's watching the deferred revenue piece”source ↗
“I review a lot of takeover QuickBooks Online files for service and install contractors, and I keep seeing the same mess when shops rely on AI bank-feed suggestions.”source ↗
“The real trouble starts where the QuickBooks bank feed meets accrual timing in HVAC and plumbing shops.”source ↗
“In the books I review, we end up disabling AI bank-feed suggestions on everything except routine fuel and card spend.”source ↗
Where this came up
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