Principles of Accounting: Correcting Errors using suspense account

////Principles of Accounting: Correcting Errors using suspense account

Principles of Accounting: Correcting Errors using suspense account

ZIMSEC O Level Principles of Accounts Notes: Correcting Errors using suspense account

  • In another topic we learnt about the need, use and purpose of the suspense account
  • In this topic we will learn about how to correct errors that involve the suspense account
  • If you are looking at how errors that are not revealed by the trial balance are corrected go to this topic
  • When found errors that involve the suspense account have to be corrected
  • Double entry transactions are created in the Journal/General Journal together with narrations describing in summary detail what error is being corrected
  • These entries are then transferred to the relevant accounts
  • When all errors have been corrected the suspense account should have a zero balance

Correction of one error

  • Assume that after preparing a trial balance the credit side was smaller by $58 dollars so we used a suspense account to balance the trial balance. Later we discover that one pages of the Sales Journal was omitted when transferring the monthly sales figure to the Sales Account. This page had sales totaling $58. This Sales for the period were under cast by $58
  • The error can be corrected by the following Journal Entries:
General Journal/Journal
DateDetailsDrCr
31 DecemberSuspense58
Sales58
Correction of undercasting of Sales by $58
General Ledger
Suspense Account
DateDetailsAmount($)DateDetailsAmount($)
31 DecemberSales

58

28 DecemberTrial Balance Difference

58

  • After this error is corrected the Suspense Account should have a zero balance as shown above

 

Correction of more than one error

The trial balance at 31 December 20X7 showed a difference of $77, being a shortage on the debit side. A suspense account is opened, and the difference of $77 is entered on the debit side of
the account.
On 28 February 20X8 all the errors from the previous year were found.

  1.  A cheque of $150 paid to L Kuedza had been correctly entered in the Cash Book, but had not been entered in Kuedza’s account
  2. The purchases account had been undercast by $20
  3. A cheque of $93 received from K Sadza had been correctly entered in the Cash Book, but had not been entered in Sadza’s account

These three errors resulted in a net error of $77, shown by a debit of $77 on the debit side of the suspense account.

Required:

  1.  Make journal entries correcting entries in accounts for the above errors
  2. Record double entry for these items in the suspense account

a) The Journal entries will be as follows:

General Journal
DateDetailsDr
$
CR
$
28 FebruaryL Kuedza150
Suspense Account150
Recording a payment which had previously omitted in Kuedza's account
28 FebruaryPurchases20
Suspense Account20
Correcting the Purchases figure which had been undercast by $20
28 FebruarySuspense Account93
K Sadza93
Correcting a payment from K Sadza which had not been posted to his account

b) The suspense account will look as follows:

General Ledger
Suspense Account
DateDetailsAmount($)DateDetailsAmount($)
1 JanuaryBalance b/d7728 FebruaryL Kuedza150
28 FebruaryK Sadza9328 FebruaryPurchases20


170


170

To access more topics go to the Principles of Accounts Notes.

By |2017-08-08T14:09:45+00:00August 8th, 2017|Notes, Ordinary Level Notes, Principles of Accounts Notes|Comments Off on Principles of Accounting: Correcting Errors using suspense account

About the Author:

He holds an Honours in Accountancy degree from the University of Zimbabwe. He is passionate about technology and its practical application in today's world.
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