USA How to correct overstated expense after fiscal year end close

[PAN]

I am writing to ask for advice.



Fiscal year end 2020 I made an entry to accrued $5,000 legal fees expense.

Debit Legal Expense (60015) $5,000

Credit accrued general (22500) $5,000

After year end closing, I realize this invoice was already paid. Oops too late!

In Fiscal year 2021 the system automatically reverse the entry.

Debit accrued general (22500) $5,000

Credit Legal Expense (60015) $5,000

How do I correct this mistake in Fiscal year 2021?

Please advice,

 

[kirby]

If it is too late to fix in fiscal 2020, then the system automatic reversal is correct in fiscal 2021. So no additional correction can be made in fiscal 2021.

 

[PAN]

If it is too late to fix in fiscal 2020, then the system automatic reversal is correct in fiscal 2021. So no additional correction can be made in fiscal 2021.

No, I do not agree
The invoice is already paid in Fiscal Year 2020 - I understand we cannot do anything in 2020. Remember, the accrued journal entry double pay the invoice in 2020 by $5,000.
What can be done to zero out this faults exp in the project in 2021.

 

[PAN]

If we didn’t have problem, in 2021 we will have this Journal entry

Debit Expense 5000

Credit account payable 5000

Debit Account Payable 5000

Credit Cash 5000

 

[kirby]

At the end of fiscal 2020, your accrual created a $5,000 erroneous credit in acct 22500. That amount was in your fiscal year end balance sheet. The auto reversal in fiscal 2021removed the erroneous balance in acct 22500, but then credited acct 60015 for $5,000. That cannot be fixed without moving the error to another account.

 

[AGH the CPA]

Kirby is right. The reversal of the accrual fixed the balance sheet account but the expense account cannot be "fixed" unless you hit retained earnings which is usually only reserved for major adjustments. 5K would very rarely be considered a major adjustment. If you can no longer change 2020 numbers, your 202 expenses will remain overstated by 5k and your 2021 expenses will be understated by 5k.