Which statement correctly describes the use of correcting entries?

• A. They are used to record initial transactions
• B. They adjust depreciation
• C. They fix errors in the journal or ledger without erasing
• D. They prepare monthly budgets

Answer: (C)

Correcting entries exist to fix mistakes found after transactions have been recorded, by moving the wrong amount to the correct accounts without erasing the original entry. They restore accurate balances in the journal and ledger by reversing the incorrect posting and posting the proper one. For example, if a $300 office supplies purchase was accidentally posted to Rent Expense, a correcting entry would debit Office Supplies (or the proper expense) for $300 and credit Rent Expense for $300, correcting the classification without touching the cash impact of the original entry. Correcting entries are not about recording new transactions, adjusting depreciation, or preparing budgets; they’re specifically for tidying up errors already made.