Chapter 13

Question 1

Which errors have the suspense account involved?

Answer 1

Omission 2
Transposition
Original entry 1
Original entry 2

2, 5,6,7

Question 2

What is a suspense account?

Answer 2

A temporary account which is used when one side of the entry is unknown. It is used to correct errors where debits do not equal credits, i.e. when the trial balance does not balance.

Question 3

When may a suspense account also be used?

Answer 3

where the other side of an entry is unknown
i.e. we want to post a transaction to the account but do not yet know where to post all of the entry,
e.g. cheque received with no remittance so we do not know which customer it is from.

Question 4

A suspense account is a temporary account. What does this mean?

Answer 4

It must be cleared before the financial statements are prepared

Question 5

How are errors corrected?

Answer 5

By Journal entry (the double entry to record a transaction)

By involving the suspense account

Question 6

When correcting errors using the suspense account: what are the generic three steps?

Answer 6

1. What double entry have we got?
2. What double entry do we want?
3. What double entry is required to correct the error?

Question 7

Whenever an entry has been made on the wrong side of an account - how can the error be fixeD?

Answer 7

By doubling the amount and recording it on the correct side of the account

Question 8

how to fix Omission2

Answer 8

1 We have:
Dr Cash (or other)
Cr Suspense (missing d/c) entry

2) we want
Dr Cash
Cr Receivables

3) fix
Dr Suspense - to clear Cr amount
Cr receivables - to record amount

Question 9

How to fix transposition/original entry 1

Answer 9

1) we have
Dr expense
Cr accruals
Dr suspense (the difference)

2) we want
Dr Expense (correct)
Cr accruals

3) Dr Expense (difference
Cr suspense to clear

Question 10

how to fix original entry 2

Answer 10

1) what we have
Dr Suspense 1000
Cr Cash 500
Cr Payables 500

2) we want
Dr Payables 500
Cr Cash 500

3)
Dr Payables 1000
Cr suspense 1000