Topic 4 of 5 · Form 4
Correction of errors and suspense accounts
Corrected by a journal entry: debit the account that should be debited (or credit the wrong account), with a narration.
Notes for this topic 1 file, in order
Create a free account to download PDFs.
Errors not affecting the trial balance
Corrected by a journal entry: debit the account that should be debited (or credit the wrong account), with a narration.
Worked example: Repairs of US$300 were wrongly debited to the machinery account (error of principle). Correct it.
Dr Repairs 300, Cr Machinery 300 – being correction of repairs posted to the machinery account.
Errors that affect the trial balance
If the trial balance does not agree, the difference is placed in a suspense account so final accounts can be prepared. When errors are found, they are corrected through the suspense account.
Worked example: Sales were overcast by US$100. Correct it.
Dr Sales 100, Cr Suspense 100.
Effect on profit
Some corrections change profit (e.g. an expense wrongly treated as an asset); others only affect the statement of financial position (e.g. a receivable posted to the wrong customer). Draw up a statement of corrected profit.
Check yourself
- Name the error where a transaction is completely left out.
- Purchases of US$250 were posted to the sales account. Is this an error of principle or commission?
- When is a suspense account opened?
Show answers
- Error of omission.
- Error of principle (wrong class of account).
- When the trial balance totals do not agree.
Questions about this topic (0)
No questions about this topic yet.
Sign in or create a free account to join in.