Errors And Suspense Accounts Flashcards
The two categories of errors
- Where the TB still balances
- Where it TB doesn’t balance
Errors where the TB still balances
- Error of omission
- Error of commission
- Error of principe
- Compensating error
- Transposition error
Error of omission
Transaction completely omitted
Error of commission
Transaction recorded in wrong account but right financial statement
Error of principle
Transaction conceptually recorded incorrectly
Wrong class
E.g. debuted as expense mit asset
Compensating error
Coincidentally equal and opposite
Transposition error
Correct DE but two digits the wrong way round
Approaching error questions
- Did do
- Should do
- To correct
If one side of the DE not mentioned, assume recorded correctly
Suspense accounts
Temporary account to allow a transaction to be recorded in accounting system. Even though a ledger account for one side not yet confirmed
Could be automated or manual
Suspense account must be cleared before FS can be prepared
If interest paid is listed as an unmatched item on the exception report then is the suspense account debited or credited?
Debited
I.e. the actual interest is the unknown part
Because the bank statement definitely knows that cash has changed. So it must be the other side.
Is interest paid a debit or a credit?
Credit
Impact on profit:
Dr P&L
Cr P&L
No impact
Impact on profit:
Dr Statement of financial position account (aka suspense account)
Cr Statement of financial position account (aka suspense account)
No impact
Impact on profit:
Dr P&L
Cr Statement of financial position account (aka suspense account)
Increase profit
Impact on profit:
Dr Statement of financial position account (aka suspense account)
Cr P&L
Increase in profit
