Errors and Suspense Accounts Flashcards
what are the two categories errors can fall into?
- error where the trial balance still balances
- errors where a suspense account is created
what is error of omission?
a transaction has been completely omitted from the accounting records
what is error of commission?
a transaction has been recorded in the wrong account but in the right financial statement (eg motor expenses recorded as stationery)
what is error of principle?
transaction has conceptually been recorded incorrectly (e.g debited as an expense rather than an asset)
what is a compensating error?
errors which are coincidentally equal and opposite to each other
what is a transposition error?
the correct double entry has been made but two digits in the amount are recorded the wrong way round
what is a suspense account?
a temporary account which allows a transaction to be recorded in the accounting system even though one side of the transaction hasn’t been confirmed
what effect does
DR statement of financial position
CR statement of financial position
have on profit?
No impact
what effect does
DR statement of profit or loss
CR statement of profit or loss
have on profit?
No impact
what effect does
DR statement of profit or loss
CR statement of financial position
have on profit?
profit decreases
what effect does
DR statement of financial position
CR statement of profit or loss
have on profit?
profit increases
