A suspense account
is thus an account to which the deference in the trial balance is posted temporarily pending the identification of the cause of
the error. The suspense account is debited
if the total of the credit side of the trial balance exceeds the debit side, while the suspense account is credited if the
total of the debit side of the trial
balance exceeds the credit side. On
locating error in the beginning or
during the course of the subsequent accounting period, suitable accounting entries are made to rectify it.
Note: errors of any
type should be corrected through
the medium of the journal . it is not
good suspect the recorder.
Therefore, when an error is
discovered, an additional entry is made to cancel the error. An
explanation of such entry is made
so that when checking again, no problem will be encountered. Note that those
errors which did not affect the trial balance will be corrected by additional
entries
Illustrations
Below is the list of transaction of ngwoke as at 31st December, 1999
v - goods sold for N100 to A.
Adamu was wrongly posted to the debit side of B.A Adams account
v cash sales N50
was credited to the purchases A/C
v purchased of an office typewriter
N1,200 was posted to the debit side of
purchases account
v drawings in form of goods costing
N800 has not being recorded anywhere in
the books
v a credit not for N620 issued to a debtor was entered in the returns forward book as N260 and
was posted to the ledger accordingly
v a
cheque for N719 issued to a creditor was entered in the cash book as N791
v an invoice for N280 issued to a customer was entered as
N820 in the slaes day book
v a cheque for N320
issued for carriage o sales was
debited to carriage inwards account.
Required to:
Rectify the above errors
by means of journal
Solution:
Correction of error
Journal
Particulars
|
Debit N
|
Credit N
|
A.Adam’s account
|
100
|
|
B. adam’s account
|
100
|
|
Being correction
of error of wrong posting
|
||
Purchases account
|
50
|
|
Sakes account
|
50
|
|
Being correction
of error of wrong posting
|
||
Office equipment
account
|
1200
|
|
Purchases account
|
1200
|
|
Being correction
of error of wrong posting
|
||
Drawings
|
800
|
|
Purchases
|
800
|
|
Being correction
of error of wrong posting
|
||
Debtors
|
360
|
|
Sundry debtors
|
360
|
|
Being correction
of error of wrong posting
|
||
Bank account
|
72
|
|
Creditors account
|
72
|
|
Being correction
of error of wrong posting
|
||
Sales account
|
540
|
|
Sundry debtors account
|
540
|
|
Being correction
of error of wrong posting
|
||
Carriage outwards account
|
320
|
|
Carriage inwards account
|
320
|
|
Being correction
of error of wrong posting
|
Practice to erase, delete or over write figures and substitute the correct ones in the books of account. The
need to correct errors through the use fo journal crises in order to minimize
the incidence of fraud and it also helps
to keep the cooks clean and tidy.
Illustration: a trial balance
extracted from the books of S.oji & Co at the end of the month did
not agree. The total of the debit column
of the trial balance exceeded that on the
credit side by N598. A suspense
account was opened and this difference was credited to it. The sources of the discrepancy were later traced to the following errors.
a. The debit balance on A. Jide’s accounts in the
sales ledger was incorrectly calculated
as N695 instead of N695 instead of n659.
b. a return outward of N390 was correctly posted to d Johnson’s
account in the purchases ledger, but was not posted to the returns
outwards account.
c. A bank over draft of N152 which was
shown in the cash book was omitted from
the trial balance
d. A discount received of N10 was
posted to the wrong side of the
discount received account
e. A
sale invoice for N385 in the name of K apiaji was accidentally filed
with his order and , so, was completely
omitted from the books
You
are required to :
i.
correct this errors through the
medium of a journal
ii.
write
up the suspense account
suggested solution
i. JOURNAL
Particulars
|
folio
|
Debit
N
|
Credit N
|
A. Suspense
Account
|
36
|
||
A. Jide
|
36
|
||
Being correction of A Jides balance in the sales ledger
which was incorrectly calculated as N695 instead of N659.
|
|||
B. Suspense account
|
390
|
||
Returns outwards
|
390
|
||
Being return outwards not
posted to the returns outwards account but correctly debited to D.
Johnson’s account in the purchases ledger
|
|||
C suspense account
|
20
|
||
Discount received
|
20
|
||
Being N10 discount
received posted to the wrong
side of the discount
|
|||
D. k. Apiaji
|
385
|
||
Sales
|
385
|
||
Being invoice earlier omitted in the
book
|
20
|
Dr suspense account cr
Particulars
|
Amount N
|
Particulars
|
Amount N
|
A. JIDE
|
36
|
Balance
|
598
|
RETURNS OUTWARD
|
390
|
||
Bank overdraft
|
152
|
||
Discount received
|
20
|
||
598
|
598
|
Correction of errors
When errors are discovered, it
must be crossed out where it was not done, it is against
accounting profession. If an auditor or external
person sees it, he or she will .
Illustrations :
The following is the summary of the
trial balance of Ezenwa & co AS AT
31ST Dec, 2011
Debit credit
Total of all accounts 1661 1120
N1661 1120
The following
errors were also discovered
v good worth of N300
bought for Tanu & co was wrongly posted to the debit side of his account .
v The
discount allowed account is
higher by N100
v Discount received N100 was entered
in the ah book only
v Sales of N89 correctly debited to
the debtors account but wrong credited to the sales account
as N98.
v the total of N50 in the discount column on the credit
side of the cash book has not been
posted
Required:
i.
to slow the journal entries
to correct the errors
ii.
write up the suspense account
solutions: journal
Particulars
|
Debit
N
|
Debit
N
|
Suspense account
|
300
|
|
Tanu & Co
|
300
|
|
To record the
transaction correctly
|
||
Suspense
account
|
100
|
|
Discount allowed
account
|
100
|
|
Being correction of error of over cash
|
||
Suspense account
|
100
|
|
Divident
|
100
|
|
Being correction of error of incomplete record
|
||
Sales account
|
9
|
|
To recorded the
correction of error of transposition
|
9
|
|
Suspense account
|
||
Discount allowed
|
50
|
|
Being correction of error of omission
|
50
|
Revision questions
1. define accounting and state its functions
2. how does accounting differ from
book – keeping
3. what are subsidiary books .
List types of subsidiary books used by businesses.
4. why is it necessary to
classify journal into various
categories
5. distinguish between the special journal and the journal
proper. (b) out line the specific uses
of the journal proper.
6. Enter the following transactions in the cash book of Emeka Ugbanu as at 1st March, 1999 who commenced business with the sum
of N500,000 only
2/3/1999 - cash sales to date
N100,000
4
“ - purchased goods for cash N50,000
8
“ paid rent
N5000
10
“- paid insurance in
cash
500
11
“ – Nwele paid
on the account 2,500
15 “- paid for advertisement
600
18 “ -
paid for stationary in
cash
300
20
“- cash sales to date
30,000
23
“- purchased furniture for
cash
32,000
25
“- paid for postage
& stationery in cash 430
28 “-
paid wages and salaries
5000
30 “-
paid izzo
2,000
B. why is the
cash book regarded as the most important book of prime and
final entry?
7. enter the following transactions in the double
column cash book of Idembia for
the month of April 2009.
and show the balances
April balance
b/f 50, 000
April 1
|
Bank
|
80,000
|
2
|
Purchases(cash)
|
20,000
|
3
|
Cash sales
|
40,000
|
6
|
PHCN bill paid by
cheque
|
10,000
|
7
|
Cash sales paid
into bank
|
40,000
|
10
|
Withdraw cash from bank for office use
|
28,000
|
15
|
Cash sales to date
|
20,000
|
16
|
Paid Eze by Cheque
|
2,000
|
20
|
Paid cash into bank
|
20,00
|
20
|
Received cheque from ek$ndiegu
|
30,000
|
22
|
Bought office furniture for cash
|
10,000
|
23
|
Paid for telephone by cheque
|
1,000
|
24
|
Cash sales to date
|
40,000
|
28
|
Cash sales paid into bank
|
35,000
|
31
|
Paid wages &
salaries
|
13,000
|
7b
|
What is a contra entry?
|
|
8b
|
Explain the followings
|
|
i.
|
Petty cash book
|
|
ii
|
Imprest system
|
|
iii
|
Float
|
8b. the following relate to the business of
Ezaka for the month of July, 2007
July 1
|
Imprest cash received from the main cashier
|
N
20,000
|
July 2
|
Typing papers
|
500
|
July 5
|
Office cleaning
|
1,000
|
July 8
|
Postage & stamps
|
100
|
July 11
|
Fuel for office van
|
1,500
|
July 15
|
Photocopying of
documents
|
200
|
July 18
|
Telephone charges
|
800
|
July 19
|
Office clearing
|
600
|
July 21
|
I.O.U to Obasi
|
1,000
|
July 24
|
Envelops
|
160
|
July 26 fuel
|
Fuel
|
1000
|
July 28
|
Paid odom n
|
800
|
July 29
|
Stationeries
|
1000
|
July 31
|
Telephone charges
|
200
|
a. To record the above transactions in
the petty cash book (maintained on the
imprest system ) for the month of July,
2002
b. Post the items to the ledger, and
c. Abstract a trial balance
9. Briefly explain the following types of ledger account
(a) personal accounts (b) real accounts (c) nominal account
10. What do you
understand by (a) posting (B)
Double entry principle (C) account
balancing
10 b) enumerate the
objective of preparing a trial balance
11. enter the
following transactions in the three column cash book of a Njoku, post to the
ledger and extract a trail balance
April 1
|
Cash in hand
|
28,000
|
Cash at hand
|
46,000
|
|
April 6
|
Purchase made in cash
|
15,000
|
April 8
|
Paid insurance by cheuqe
|
38,000
|
April 10
|
Received from
amrar a
|
1,850
|
April 12
|
Bought goods
& paid by cheque
|
29,531
|
Discount received
|
1,000
|
|
April 15
|
Paid cash into bank
|
16,000
|
April 17
|
Cash sales to date
|
35,000
|
April 18
|
Received N9550
cash in full settlement of debt
N10,000 from Ekechi
|
|
April 21
|
paid Nwokoha by
cheque
|
8000
|
April 23
|
cash purchases
|
21,000
|
April 29
|
Withdrew cash from
bank for office use
|
18,000
|
April 30
|
Paid wages
N14,000. and sundry expenses
N1500
|
NO 12 below is the list of transactions from Ifeoma Boniface business as at 31st December, 1999
v Goods sold for N100 to S. Njoku was wrongly
posted to the debit side of B Njokus
accounts
v cash sales N50 was wrongly credited to the purchase A/c
v purchased of an office
typewriter N1200 was posted to the debit side of purchases account
v drawings inform of
goods costing N800 ha not being
recorded anywhere in the books
v a
credit note for N620 issued to a debtor
was entered in the returns inwards book as N260 and was posted to the ledger accordingly
v a cheque for N719 issued to a creditor was entered in the cash
book as N791
v an invoice of N280 issued
to a customer was entered as N820 in the
sales book
v a cheque for N320 issued for carriage on sales was debited to carriage inwards accounts .
Required:
to rectify the above
errors by means of journal (narration is necessary?