Errors and suspense account

ERRORS AND SUSPENSE ACCOUNT

Firstly, let me present the solution to Part 2 of the partnership question done last week. Pay keen attention to the principles applied.

RUBY AND MARJORIE/BALANCE SHEET AS AT MARCH 31, 2017

Below is a worked example of an errors and suspense account.

On June 30, 2017, Carlton Davey drew up a trial balance which showed that the total of the credit balance was $156 greater than the total of the debit balances. A suspense account was opened for the amount of this difference. Further checks revealed the following errors: i. Sales day book had been undercast by $400. ii. The total of the discount allowed column in the cash book, $260, had been credited to discount received account in error.

iii. Carlton Davey paid his private electricity bill of $296 from the business bank account. The bank account was entered correctly, but the sundry expense account was debited in error.

iv. A credit note for $128, received from Alston, had been entered correctly in the appropriate subsidiary book, but was wrongly posted to Alston’s account as $92 You are required to:

A) Prepare the journal entries to correct the above errors. Write up the suspense account.

REASONING

i. Since the total of the credit balance is greater, to get the trial balance level, the suspense account must be debited. ii. This is owner’s drawings and not an expense incurred by the business’.

WORKNGS SOLUTION A) GENERAL JOURNAL B) SUSPENSE ACCOUNT REMINDER

Trial balance is a list of balances of accounts. Accounts are listed down and balances brought down (b/d) in their accounts, entered in the debit (Dr) column and credit (Cr) column. The total of the Dr and Cr columns should always be the same.

INDICATION OF BALANCES

This is all we have time for this week. Visit again next week, when the presentations will continue. Remember, If it is to be, it is up to me (10 simple 2-letter words). Roxanne Wright is an independent contributor. Send comments to kerry-ann.hepburn@gleanerjm. com.