The Trial Balance, Errors, & Suspense Accounts

Question 1

If we list all of the balancing figures from the accounts in our general ledger then…

Answer 1

the sum of all the Dr Balances should be the same as the sum of all the Cr balances.

Question 2

If computerised accounting software is used, it is likely that a trial balance can be…

Answer 2

• Generated at the click of a button — just enter the date you want to generate the balance for and it will automatically pull the balances across form the general ledger accounts.

Question 3

Describe a suspense account

Answer 3

• A suspense account is a temporary account that identifies that an error has been made.
• The error must be identified and corrected to eliminate the suspense account.
• It NEVER appears in the final accounts.

Question 4

Describe correcting entries

Answer 4

Where a suspense account has been used you need to be able to make correcting entries to eliminate the suspense account

Question 5

What is the 3 step process you need to think through when eliminating a suspense account before producing the final accounts?

Answer 5

1. What double entry did they post?
2. What double entry should they have posted?
3. What double entry is required to correct the error?

Question 6

Would all errors that exist in accounts cause a suspense account to be created?

Answer 6

No — they only arise if debits and credits are not equal.

Question 7

What are the errors that require a suspense account (3)?

Answer 7

1. Single-sided entry, e.g., Cr Cash, No debit
2. Both sides of double entry posted to the same side, e.g., Dr Salaries, Dr Cash
3. Unequal double entry, e.g., Dr Salaries expense 100, Cr Cash 10

Question 8

What are errors that don’t require a suspense account (4)?

Answer 8

1. Error of omission
2. Error of commission
3. Error of principle
4. Reverse double entry

Question 9

Describe error of omission

Answer 9

• Where a transaction has been completely omitted, e.g., payment of salaries have not been posted at all.

Question 10

Describe error of commission

Answer 10

• Where a transaction has been posted, but one side has been entered to the wrong account, e.g., Dr Telephone expense instead of salary expense.

Question 11

Describe error of principle

Answer 11

• Where a more serious error has been made.
• With error of commission although the wrong category of expense, for example, was used at least we are showing an expense.
  — Error of principle would be like Dr Non-current asset instead of Dr Salary expense
• This will affect the profit for the period and the net assts figure on the SFP.

Question 12

Describe reversed double entry

Answer 12

• Where both sides of a double entry are on the wrong side, e.g., salary payments — Dr Cash, Cr Salaries expense