GCSE-ready- Home
- Lessons
- IGCSE Accounting
- Correction of errors and the suspense account
Correction of errors and the suspense account
🎬 The doodle video for this lesson is coming soon. Subscribe on YouTube to see it first.
Some errors stop the trial balance from balancing; others do not. Both kinds are corrected with journal entries.
Errors not revealed by the trial balance
Omission: a transaction left out completely.
Commission: right amount and type of account, but the wrong person's account (such as A Smith instead of A Smyth).
Principle: posted to the wrong type of account (such as a van debited to motor expenses).
Original entry: the wrong amount used for both entries.
Complete reversal: debit and credit swapped.
Compensating: two errors that cancel each other out.
Commission: right amount and type of account, but the wrong person's account (such as A Smith instead of A Smyth).
Principle: posted to the wrong type of account (such as a van debited to motor expenses).
Original entry: the wrong amount used for both entries.
Complete reversal: debit and credit swapped.
Compensating: two errors that cancel each other out.
Errors revealed by the trial balance
Only one side of the entry recorded (a single entry).
Two debits or two credits.
A casting (adding) error in one account.
A transposition in one entry only (£54 written as £45 on one side).
The difference is placed in a suspense account so the trial balance totals agree until the errors are found.
Two debits or two credits.
A casting (adding) error in one account.
A transposition in one entry only (£54 written as £45 on one side).
The difference is placed in a suspense account so the trial balance totals agree until the errors are found.
Correcting with the journal
Example: rent of £500 debited to wages. Journal: Dr rent £500, Cr wages £500.
Example: the trial balance credit side is £300 short, so suspense has a credit balance of £300. Then sales of £300 are found to have been omitted from the sales account: Dr suspense £300, Cr sales £300, which clears the suspense account.
Example: the trial balance credit side is £300 short, so suspense has a credit balance of £300. Then sales of £300 are found to have been omitted from the sales account: Dr suspense £300, Cr sales £300, which clears the suspense account.
A payment of £70 for repairs was correctly entered in the bank account but debited to the repairs account as £40. Will this affect the trial balance?
- Debit side is £30 too low.
- Debits and credits no longer agree.
Answer: Yes, the debits will be £30 short, so a suspense account is needed.
Errors not shown by the trial balance: omission, commission, principle, original entry, complete reversal, compensating. Errors that are shown go to a suspense account. Correct all errors with journal entries.
Check you have got it
Answer 7 quick questions with instant marking. If you get one wrong, GCSE-ready shows you why and gives you another go. It is free, and you do not need an account.