Theory question 105
Correction of Errors and Suspense AccountThe bookkeeper of Kamara Ltd. prepared a trial balance which failed to agree. The difference of Le 714 credit was transferred to a Suspense Account. The following errors were later discovered:
(i) A cash payment of Le 1,512 had been posted as a receipt in the cash book.
(ii) The Sales Account was overcast by Le 2,940
(iii) The Purchases Account was overcast by Le 2,940
(iv) Return inwards of Le 1,596 was not recorded in the books.
(v) Bank charges of Le 1,554 had been posted into the cash book. No entry was made elsewhere in the books.
(vi) The opening balance of a debtor's account had been brought down as Le 16,238 instead of Le 16,994
(vii) An item of fixed asset sold for Le 21,000 had been debited to cash and included in sales.
You are required to: (a) prepare journal entries to effect the necessary corrections, and (b) write up the Suspense Account.
Show the model answer
(a) Journal (Dr / Cr, Le), each with a short narration:
(i) Dr Suspense 3,024; Cr Cash 3,024 (payment of 1,512 debited instead of credited: double the amount)
(ii) Dr Sales 2,940; Cr Suspense 2,940 (sales overcast)
(iii) Dr Suspense 2,940; Cr Purchases 2,940 (purchases overcast)
(iv) Dr Returns inwards 1,596; Cr Debtors 1,596 (omitted returns; no effect on suspense)
(v) Dr Bank charges 1,554; Cr Suspense 1,554 (charges entered in the cash book only)
(vi) Dr Debtor 756; Cr Suspense 756 (16,994 − 16,238)
(vii) Dr Sales 21,000; Cr Fixed asset disposal 21,000 (sale of fixed asset wrongly treated as sales; no effect on suspense)
(b) Suspense Account: Dr cash 3,024; purchases 2,940 = Le 5,964. Cr difference per trial balance 714; sales 2,940; bank charges 1,554; debtor 756 = Le 5,964 (account closes with no balance)
Ask for each error whether it made the trial balance disagree; only those go through the suspense account.