topic5 errors and the suspense account Flashcards

1
Q

errors where trial balance balances

A

-omission= transaction not recorded at all
-commission= posted to the wrong account, but same type
-principle= conceptually recorded incorrectly
-compensating= 2 or more errors that cancel each other out
-original entry= right entry but wrong amount
-reversal of entries= DR and CR wrong way round
ALL AFFECT BOTH DR AND CR, SO TRIAL BALANCE STILL BALANCES

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

how to correct errors where the tb still balances

A

-what double entry has been posted
-what double entry should have been posted
-what is the correction
IF ONE SIDE OF THE DOUBLE ENTRY IS NOT MENTIONED THEN ASSUME IT HAS BEEN RECORDED CORREC TLY

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

errors where the trial balance does not balance

A

-single sided entry= just debit or credit posted
-debit and credit entries are at different values
-2 debits or credits posted
-opening balance has not been bought forward
-extraction error= figure recorded incorrectly in the tb or in the wrong column on the tb
AFFECTS ONLY ONE SIDE OF TB SO DOESNT BALANCE

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

correction of errors where the tb does not balance

A

-create a suspense account to make sure tb balances: DRs=CRs
-what double entry has been posted
-what double entry should have been posted
-what is the correction
-correction always involves the suspense account and this must be cleared to a 0 balance
-suspense can also be used as a holding account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

suspense account clearance

A

-must post equal debits and credits when clearing the suspense accounts
-once cleared, can prepare the financial statements
-depending on what is causing the error, could impact on draft profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly