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# 2016 # January # Q-13

# 2015 # June # Q-14
# 2014 # June # Q-13
# 2013 # January # Q-13
# 2012 # June # Q-14
# 2011 # June # Q-11
Theory Questions & Answers

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# Error & Suspense Account # Problems from the Book

32.3A
Show the journal entries needed to correct the (a) B Roy Dr 1,410
following errors: A Ray Cr 1,410
(a) Purchases £1,410 on credit from A Ray had (b) Cash Dr 94
been entered in B Roy’s account. Bank Cr 94
(b) A cheque of £94 paid for printing had been (c) D Rolls Dr 734
entered in the cash column of the cash book D Rollo Cr 734
instead of in the bank column. (d) Purchases Dr 72
(c) Sale of goods £734 on credit to D Rolls had L Hand Cr 72
been entered in error in D Rollo’s account. (e) G Boyd Dr 128
(d) Purchase of goods on credit L Hand £819 Cash Cr 128
entered in the correct accounts in error as £891. (Needs double the mount
(e) Cash paid to G Boyd £64 entered on the to cancel out the error
debit side of the cash book and the credit side and replace it with the
correct amount.)
of G Boyd’s account.
(f) Sales Dr 320
(f) A sale of fittings £320 had been entered in the
Sales account. Fittings Cr 320
(g) Cash Dr 400
(g) Cash withdrawn from bank £200 had been
entered in the cash column on the credit side of Bank Cr 400
the cash book, and in the bank column on the (Needs double the
debit side. amount.)
(h) Purchase of goods £1,182 has been entered (h) Purchases Dr 1,182
in error in the Furnishings account. Furnishings Cr 1,182

32.6A (a) Commissions Dr 430

Journal entries to correct the following are received
required, but the narratives can be omitted.
Rent received Cr 430
(a) Rent Received £430 have been credited to (b) Bank charges Dr 34
the Commissions Received account.
Business rates Cr 34
(b) Bank charges £34 have been debited to the
(c) Motor expenses Dr 37
Business Rates account.
Bank Cr 37
(c) Completely omitted from the books is a
(d) Fax machine Dr 242
payment of Motor Expenses by cheque £37.
Purchases Cr 242
(d) A purchase of a fax machine £242 has been
entered in the Purchases account. (e) Returns inwards Dr 216
Returns outwards Cr 216
(e) Returns inwards £216 have been entered on
the debit side of the Returns Outwards account. (f) Capital Dr 2,000
(f) A loan from G Bain £2,000 has been entered Loan G Bain Cr 2,000
on the credit side of the Capital account. (g) Loan interest Dr 400
(g) Loan interest of £400 has been debited to the Van Cr 400
Van account. (h) Drawings Dr 168
(h) Goods taken for own use £84 have been Purchases Cr 168
debited to the Purchases account and credited (double the original
to Drawings. amount)

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O’Level # 2016 # January # Q-13 # Error & Suspense Account

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O’Level # 2015 # June # Q-14 # Error & Suspense Account

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O’Level # 2014 # June # Q-13 # Error & Suspense Account

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O’Level # 2013 # January # Q-13 # Error & Suspense Account

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O’Level # 2012 # June # Q-14 # Error & Suspense Account

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O’Level # 2011 # June # Q-11 # Error & Suspense Account

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# Theory Question and Answer # Error & Suspense Account
State the purpose of trial balance.
The purpose of trial balance is to check the arithmetical accuracy of the ledgers. It also assists in the
preparation of balance sheet.

Evaluate the usefulness of preparing a trial balance at the end of an accounting period.
▪ It is the primary evidence that the double entry is correct.
▪ The existence of errors can be identified and action taken.
▪ Forms the basis of preparing the financial statements.
▪ Proves arithmetical accuracy
▪ Some errors will not be revealed by the trial balance e.g., errors of omission...
▪ The trial balance will not identify the location of the errors.

Which Errors are not affect the balancing of a Trial Balance?

Error of omission - where a transaction is completely omitted from the books. For example, if a cheque
received is lost and therefore never entered in the books of account.
Error of commission - where a correct amount is entered, but in the wrong account within the same class of
account. For example, a sale of goods to J Roberts is entered in error, in J Robertson’s account.
Error of principle - where an item is entered in the wrong class (type) of account, for example, a fixed asset
entered in an expense account.
Compensating error - where two errors of equal amount, but on opposite sides of the accounts, cancel
each other out. If both the sales and purchases accounts were added up to be £10 too much, then these
two errors would cancel out in the trial balance. This is because the totals of both the debit side and the
credit side of the trial balance will be £10 too much.
Error of original entry - where an item is entered, but both debit and credit entries are of the same incorrect
amount. For example, an invoice received showing goods purchased to the value of £260 is entered in both
the purchases account and supplier’s account as £26.
Complete reversal of entries – The accounts and the sum are correct, but the debiting and crediting has
been reversed. Only two accounts are involved.
Transposition error – where the characters within a number are entered in a wrong sequence.

Hints : POOR CCTv

Principal – Omission – Original – Reversal – Compensating – Complete - Transposition

Distinguish between a compensating error and an error of reversal.

Error of reversal – The accounts and the sum are correct, but the debiting and crediting has been reversed.
Only two accounts are involved.

Error of compensation – There are two separate and unrelated errors in the books. At least one of the sums
debited and credited are incorrect in both transactions, but the two errors arithmetically cancel each other
out.

Explain the term suspense account.

A suspense account is opened as a temporary measure when the trial balance fails to agree. It has a
balance equal to the net balance of all errors in the ledger.

Identify errors that may cause a trial balance not to balance.

▪ Omission of debit or credit entry. ▪ Error of calculation.
▪ Error of posting. ▪ Error of casting.
▪ Addition error. ▪ Entering transactions twice on the same side.

Evaluate the use of a suspense account when preparing a trial balance.

▪ Enables trial balance to balance
▪ Identifies the net value of errors to be found.
▪ Errors remain in the accounts until found
▪ Financial statements prepared will be
inaccurate.
▪ Some errors will not be revealed by the
suspense account
▪ Does not help to actually find the error.

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O’Level # MCQ # Error & Suspense Account

2015 – Jan (Ans: A, C, C)

B, C

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C, A, B,

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