Theory question 102
Correction of Errors and Suspense AccountSection B (Answer any three questions from this section)
The total balance of PQR Company Limited failed to agree and the difference was posted to a suspense account. An investigation into the books revealed the following: (a) A balance of ₦156 on Sales Day Book was carried forward as ₦516 (b) A sum of ₦140 paid for wages was recorded only in the cash book (c) A payment of ₦840 made by Malam Mohammed was credited to Malam Ahmed's account. (d) An amount of ₦800 posted to furniture account included ₦60 for furniture repairs (e) Purchases Day Book was overcasted by ₦440. (f) A payment of ₦31.50 for postage was posted to the credit side of the account (g) A balance of ₦118 due from a debtor was brought down as ₦181. You are required to prepare (i) Journal entries to correct the errors and (ii) A suspense account.
Show the model answer
(i) Journal
(a) Dr Sales 360 / Cr Suspense 360 (sales overcast: 516 − 156)
(b) Dr Wages 140 / Cr Suspense 140 (wages not posted)
(c) Dr Malam Ahmed 840 / Cr Malam Mohammed 840 (error of commission; no suspense)
(d) Dr Furniture repairs 60 / Cr Furniture 60 (error of principle; no suspense)
(e) Dr Suspense 440 / Cr Purchases 440 (purchases overcast)
(f) Dr Postage 63 / Cr Suspense 63 (₦31.50 on the wrong side: twice the amount to correct)
(g) Dr Suspense 63 / Cr Debtor 63 (balance overstated: 181 − 118)
(ii) Suspense Account: Dr balance b/d (difference) 60; purchases 440; debtor 63; total 563 / Cr sales 360; wages 140; postage 63; total 563
So the original trial balance difference was ₦60 (debit side short)
Only errors that made one side of the trial balance different go through suspense; (c) and (d) do not.