Chapter 27 Suspense Account and Errors

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Chapter 27 Suspense Account and Errors

• Correction of Errors
• Errors Not Affecting Trial Balance Agreement
• Errors Affecting Trial Balance Agreement

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Errors Not Affecting Trial Balance Agreement

• Error of Omission
• Error of Commission
• Error of Principle
• Compensating Error
• Error Original Entry

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Errors Affecting Trial Balance Agreement

• When an error is made in one ledger account, it
  will only cause a difference in the trial
  balance.
• If two or more accounts have errors, the amounts
  will be affected and different.
• Hence, a suspense account is opened to make the
  trial balance totals agree.

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Example 1 (Total Dr gt Total Cr)
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Example 1
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Example 1
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Example 1
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Error found A credit sale of 100 had been just
posted to debtors account.
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Error found A credit sale of 100 had been just
posted to debtors account.
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Error found A credit sale of 100 had been just
posted to debtors account.
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Error found A credit sale of 100 had been just
posted to debtors account.
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Error found A credit sale of 100 had been just
posted to debtors account.
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Error found A credit sale of 100 had been just
posted to debtors account.
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Example 2 (Total Dr lt Total Cr)
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Example 2 (Total Dr lt Total Cr)
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Example 2 (Total Dr lt Total Cr)
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Example 2
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Errors Found

• The bank balance in the cash book at 31 December
  1998 amounting to 4 300 was incorrectly brought
  down as 4 800.
• A purchases invoice of 500 had been recorded
  correctly in the purchases day book but wrongly
  recorded in the creditors account as 1 500.

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The bank balance in the cash book at 31 December
1998 amounting to 4 300 was incorrectly brought
down as 4 800.
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The bank balance in the cash book at 31 December
1998 amounting to 4 300 was incorrectly brought
down as 4 800.
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Error found The bank balance in the cash book
at 31 December 1998 amounting to 4 300 was
incorrectly brought down as 4 800
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Error found The bank balance in the cash book
at 31 December 1998 amounting to 4 300 was
incorrectly brought down as 4 800
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Error found A purchases invoice of 500 had
been recorded correctly in the purchases day book
but wrongly recorded in the creditors account as
1 500
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Error found A purchases invoice of 500 had
been recorded correctly in the purchases day book
but wrongly recorded in the creditors account as
1 500
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Error found A purchases invoice of 500 had
been recorded correctly in the purchases day book
but wrongly recorded in the creditors account as
1 500
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Error found A purchases invoice of 500 had
been recorded correctly in the purchases day book
but wrongly recorded in the creditors account as
1 500
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Peter Chan, a sole trader, had the following
transactions during the month of May 2000

• (a) A creditors account (Cheung) was overcast
  by 100, and an other creditors account
  (Cheng) was undercast by 100.

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• (b) A new machine is purchased on credit from H
  Ltd for 1 200 plus installation cost of 200
  but no entries had been made.

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• (c) Purchase a new furniture had been debited to
  purchases account in error 5 800.

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• (d) Credit sales of 2 200 had been correctly
  entered in the customers account but had been
  debited to the purchases account as 2 020.

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• (e) Sales Day Book was undercast by 400

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• (f) A sale of goods 960 to a debtor (Chan) on
  credit was incorrectly entered in both sides as
  9 600.

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• (g) Closing stock was overcast by
• 800.

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• (h) A purchases invoice for 2 800 was entered
  twice in the Purchase Day Book.

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• (i) Credit note from Alan Ltd for 300 had been
  correctly posted to Alan Ltd but no other entry
  had been made.

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• (j) A Bad Debts of 3 300 had been written off,
  but no entries were made.

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• (k) Credit balance of 150 on F Ltds account
  had been omitted from the trial balance.

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• (l) A sales invoice for 560 had been completely
  omitted from the books.

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• (m) A sale of goods of 4 000 to Miss Mo had
  been posted in error to Mr Yus account.

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• (n) Returns Outwards Day Book was overcast by
  200

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• (o) A payment of 1 234 for new furniture had
  been credited to furnitures account and
  debited to Cash Book.

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• (p) Discounts allowed totaling 4 000 had been
  posted to the discounts received account.