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Note that, the accountant or auditor couldn't find the mistake in the previous year
If the mistake hasn't been noticed either by the Accountant or the Auditor, then where did the entry was reflected in the financial statements? There will be two possibilities
A- The mistake has affected the Profit and loss account,
Then - When the entry has been reversed by the bank,
The accountant should make the adjustments in the prior years Profit
A- The mistake has affected the Balance Sheet account,
Then - When the entry has been reversed by the bank,
The accountant should reverse the entry and the same account should be adjusted.
It will not take place simply like that. The bank Reconciliation is a must practice that every accountant should do by month end. If the mistake couldn't identify either by the accountant or auditor , then where it took place ?.There is no short cut in accounting , accountant must go everything in detail.
Agree Mr. Wajid Ali
Same will reflect in Bank Reconciliation in previous year and when bank debited in current year that will be nullified.
If accounted in the books under suspense a/c in previous year that will be reversed in current year.
