13. ACCOUNTING ERRORS AND CONTROL ACCOUNTS (7) Flashcards
What is the purpose of a suspense account?
To correct errors where debits do not equal credits - must be cleared before financial statements are prepared
£500 from the payment side of the cash book had been posted to the credit side of the payables’ ledger control account. What journal entry is required to correct this error?
a. DR payable’s ledger control £500
CR suspense account £500
b. DR suspense account £500
CR payable’s ledger control £500
c. DR payables ledger control £1000
CR suspense account £1000
d. DR suspense account £1000
CR payable’s ledger control £1000
c.
-So this transaction should have been debited to the debit side of the payable’s ledger control account. The incorrect entry would have resulted in a debit balance in the suspense account.
-To remove the incorrect entry to the payables’s ledger acc a DR of £500 and a further DR of £500 to CORRECT the entry.
- That leaves the total DR entry required is £1000 and a matching CR entry to the suspense account of £1000
A suspense account shows a credit balance of £260. Which of the following is a possible reason for the suspense account.
a. Omitting a sale of £260 from the sale ledger
b. Recording a purchase of £260 twice in the purchase account
c. Failing to write off an irrecoverable debt of £260
d. Recording an electricity bill of £130 by debiting bank acc and crediting electric acc
b.
-a credit balance on the suspense acc indicates that the debit total of the trail balance was higher than the credit total. So basically, too many items are being debited or too little has been credited.
-a is not correct because too little has been debited
-b is correct as there is an additional debit entry
-c is not correct bc both DR and CR entries have been omitted
-d is not correct as both DR and CR are there but just the wrong way around
A payment of £240 from petty cash for stationary had been entred in the books twice. What adjustment is required to correct this?
a. DR stationary acc £240
CR suspense acc £240
b. DR stationary acc £240
CR petty cash £240
c. DR suspense acc £240
CR stationary acc £240
d. DR petty cash £240
CR stationary acc £240
d.
-One of the entries needs to be removed. This is achieved with a DR to petty cash and CR to stationary
Which of the following errors would cause an entry to be made in the suspense acc?
a. rent charges debited to the local business tax acc
b. cash paid to a payable debited to the wrong payable’s acc
c. cash received from a receivable debited to the wrong receivable’s acc
d. purchase of goods by the business for the proprietor’s private consumption
c.
- a suspense acc is created when transactions are posted to ledger with unequal DR and CR. So for c, a suspense acc would need to be opened to balance the credit side.
An error where the wrong amount has been used for both the debit and credit entries is known as an error of _____________
Q66
An error of __________ is when the correct and incorrect accounts are of different types, for example, entered into a SOPL account instead of a SOFP account
Q66
An error where one side of the transaction has been entered in the wrong account (but of a similar type to the account and from the same financial statement) is known as an error of ______________
Q66
A purchased goods from B on credit. A paid for the goods within the agreed credit period of 30 days but subsequently discovered that the goods were not fit for purpose and cancelled the cheque payment before it was cashed by B.
How should A record the cancelled cheque?
Q77
my answer;
DR PURCHASE RETURNS
CR PAYABLES
Pika has an account in its nominal ledger for Bob which has a debit balance of $1,089.
Drag and drop words from the list available to complete the following statement:
________ owes _________________ $1,089. In the ledger of B this would represent ________ balance.
Available words:
A/B/an asset/a liability
Q79
my answer;
pika owes bob
bob rep asset balance?
Pika has a customer, Bob, who owed it $700 on 1st of January. During January, Bob purchased additional goods at a cost of $1,500 and returned some unwanted goods which had cost $320. During January Bob also made a payment towards settlement if its account of $750.
Drag and drop words from the list available to complete the following statement:
At 31st of January Pika’s ledger accounts would include a ______ balance for Bob for $______.
This represents ______ to Pika.
Q80
Which of the following items would be recognized as capital expenditure or revenue expenditure;
a. Replacing a faulty part with a unit that is identical to the original unit
b. Replacing a faulty part with a unit that has slightly increased production capacity
c. Legal fees for the purchase of land
d. Repainting of head office building exterior
Q82
my answer
