Docstoc

Suspense Accounts and Errors

Document Sample
Suspense Accounts and Errors Powered By Docstoc
					                                 Suspense Accounts and Errors

When only one ledger account is entered, a “Difference” in the trial balance will occur. Hence, a
“Suspense Account” is opened to make the trial balance totals agree.


Extended Accounting Equation

A______________ = C__________ + L___________________


P__________ + E_________+ A________ = R_________+ L_________ + S_________ +
C___________


                  PEA                          RLS


                  Dr (            )           Dr (          )
                  Cr (            )           Cr (          )


Suspense Accounts
                                  Trail Balance as at 31 December 2002
              Total balances extracted                                90                100

              Suspense account                                            10
                                                                         100            100


                                               Suspense account



                                       Balance sheet as at 31 Dec 2002
              Fixed assets                                                             1000
              Current assets                                                   500
              Less: current liabilities                                        100
              Working capital / Net current assets                                      400
              Suspense account                                                           10
                                                                                       1410


Examples of errors
A credit sale of $150 to Mr Chan has been omitted from his account.
     Dr Mr Chan               150
                Cr Suspense             150
A sale to C Lee for $230 was correctly entered in the sales book but entered in C Lee’s account as $320.
     Dr Suspense              90
               Cr C Lee                   90
A credit sale of $97 has been credited to H Cheung’s account
     Dr H Cheung              194
                Cr Suspense              194
Sales day book was overcast by $200
     Dr Sales                200
              Cr Suspense            200
Purchases day book was undercasted by $100
     Dr Purchase             100
              Cr Suspense            100


The total of the sales account of $1500 has been omitted from the trail balance
     Dr Suspense                    1500
                Cr
The total of the sales account of %1500 has been extracted as $1300 in the trail balance.
     Dr Suspense                   200
                Cr
The total of the sale account of $1500 has been extracted to the debit column of the trial balance
     Dr Suspense                    3000
                Cr
Correction of errors and effects on the Profit and Balance Sheet
Eg of errors                           Action required on the profit   Action required on the Balance sheet
                                       Add profit     Less profit
Sales overcast (I)                                    
Sales undercast (      )               
Purchases overcast (           )       
Purchases undercast (          )                      
Income overcast (          )                          
Income undercast (             )       
Expense overcast (             )       
Expense undercast (            )                      
Opening stock undercast (E)                           
Opening stock overcast (           )   
Closing stock undercast (          )                                  + closing stock
Closing stock overcast (           )                                  - closing stock
Prepayments of expenses                                               (    ) Current assets : prepayments
omitted
Accruals of expenses omitted                                          (    )Current liabilities: accruals
Fixed / current assets                                                 (    ) Fixed asset / current assets
undervalued
Liabilities understated                                                (    ) Liabilities

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:551
posted:4/13/2010
language:English
pages:2