Theory question 102
Correction of Errors and Suspense Account(a) What is a suspense account?
(b) Explain five errors that would not affect the agreement of the Trial balance.
(c) Mention a class of account that would always show: (i) debit balance; (ii) credit balance.
Show the model answer
(a) A temporary account opened to hold the difference when a trial balance does not agree (or to hold items not yet classified), until the errors are found and corrected.
(b) Any five: error of omission (transaction left out completely); error of commission (right amount, wrong personal account of the same class); error of principle (entered in the wrong class of account, e.g. asset as expense); error of original entry (wrong amount used for both debit and credit); complete reversal of entries (right accounts, wrong sides); compensating errors (errors that cancel each other); transposition made in both entries.
(c)(i) Debit balance: assets or expenses (e.g. drawings).
(ii) Credit balance: liabilities, capital or income.
Errors that keep debits equal to credits do not upset the trial balance.