What Is a Blind Entry?
A blind entry is an accounting entry found in financial bookkeeping that does not contain any additional information about its purpose or source. Blind entries do contain the necessary basic information required to keep accounting records correct and up-to-date, as they specify the currency value of the entry and whether it is a debit or a credit.
However, since they do not include any additional information regarding the reason for the transaction, they are often discouraged as they can be used to create fraudulent transactions that manipulate the appearance of the books.
- A blind entry is an accounting item that does not contain additional information as to its source or purpose.
- While blind entries do contain basic data such as price and date in order to balance books, the entry is not justified in any way.
- Because of their opacity, blind entries are discouraged and may even arouse suspicion of fraud.
Understanding Blind Entries
A blind entry is a journal entry that is made without giving any explanatory description of the transaction that precipitated the entry. In accounting, blind entries may include movements of money or journal entries from one area of a company's books to another, but which are made without any listed reason or justification.
Double-entry bookkeeping is the most common form of accounting. It directly affects the way journals are kept and journal entries are recorded. Every business transaction is made up of an exchange between two accounts. This means that each journal entry is recorded with two columns. For example, if a business owner purchases $1,000 worth of inventory with cash, the bookkeeper records two transactions in a journal entry. The cash account decreases by $1,000, and the inventory account, which is a current asset, increases by $1,000.
While the use of blind entries is usually discouraged because the lack of information can lead to incomplete records, blind entries can be appropriate in certain situations. A blind entry may be appropriate when a business sells only one product or service, so there is not much practical need to differentiate incoming sales between various customers. However, if used in any other context, blind entries should be investigated further.
Example of a Blind Entry
Say that Bert and Ernie run Gordon's Bank and Trust. In the bank's books, they include multiple accounts to keep track of the revenue streams for the sales of various products and lines of business. All journal entries made between accounts are to be fully supported with documentation stating the reason for the transfer so the books can be appropriately audited every year.
One day, Ernie makes a transfer from the "security and annuity sales" line of business into the "lending" line of business and does not list a supporting reason for the fund transfer. This journal entry without a listed reason for the transfer is a blind entry.