Suspense By Maura Fehily

Pre-teaching KWL Revise double entry Format of Trial Balance (reference simple Trial Balance)

Anticipation Exercise Anticipation Exercise Name   Date Topic DOUBLE ENTRY Score Before After Agree Disagree   Statement 1 Debit is the same as Credit 2 Every business has debtors and creditors 3 Kanye West Income $28 million expenditure $43 million = overdraft 4 Cash received is put on the Dr side of the Cash Account 5 All transactions should be recorded in the accounts 6 Instructions: Guess answers, read passage, answer again, compare results before & after Name   Date Topic DOUBLE ENTRY Score Before After Anticipation Exercise

2 PEOPLE INVOLVED RECEIVER GIVER

Debit Credit RECEIVER GIVER

QUESTIONS Adjustment in question 1 60 mark JOURNALISE, PROFIT & LOSS AND SUSPENSE 100 mark JOURNALISE, PROFIT & LOSS AND SUSPENSE BALANCE SHEET AND THEORY

Time Management Adjustment in question 1 60 - 100 mark question 26 - 42 minutes Start with theory part of question Worth up to 6 - 10 marks = 1.5 - 2.5 %

Debits and Credits Dr Cr Assets Liabilities Expenses Gains Purchases Sales

FIXED ASSETS Machinery €100,000 Furniture €50,000 Equipment €30,000   CURRENT ASSETS Closing Stock €20,000 Debtors €10,000 Suspense €1,000 CREDITORS AMOUNTS FALLING DUE WITHIN ONE YEAR Creditors € 20,000 Bank €20,000 TOTAL NET ASSETS FINANCED BY Ordinary Share Capital €200,000 Share Premium Net Profit Capital Employed

Journal Entries Step 1 T accounts Step 2 Do the correct entry Step 3 Look at what was incorrect and correct Step 4 Dr in T account Dr column in journal Narration Note must explain entry

ALL JOURNAL ENTRIES WILL GO TO EITHER PROFIT AND LOSS OR BALANCE SHEET

Profit & Loss Pick out entries for profit and loss   DR CR - + Dr Journal = Minus Profit Cr Journal = Plus Profit

Balance Sheet Entry in Dr Column = + Asset Entry in Cr Column = - Asset Entry in Cr Column = + Liability Entry in Dr Column = - Liability

SUSPENSE You sell on credit to Debtors You buy on credit from Creditors If an entry is on the Dr side of the Ledger then it is posted to the Dr side of the Journal If an entry is on the Cr side of the Ledger then it is posted to the Cr side of the Journal

A question on this topic has two types of adjustments, those errors that affect the balancing of the trial balance and those errors that are not revealed by the trial balance. In the former a Suspense account is used temporarily to balance the trial balance.

Error not effecting Suspense Insurance due €340 and rent prepaid to Sexton €460 were not recorded in the books. No entry therefore no Suspense So double entry is Dr Profit & Loss a/c 800 Cr Insurance Company 340 Cr Rent Prepaid 460 Narration Note

Corrected Net Profit Profit & Loss entry on DR column of Journal It is a - Minus If on the CR Column of Journal It is a + Plus

Balance Sheet The Insurance was due by Sexton so it is a Liability in Balance Sheet The Rent was prepaid to Sexton so it is also a Liability in Balance Sheet

Error effecting Suspense Sexton returned furniture previously purchased on credit for €27,000. This was entered in the accounts as €37,000. //However, a credit note subsequently arrived from the supplier showing a transport charge of €500.// The only entry made in respect of this credit note is a credit entry of €26,500 in the creditor’s account.

Correct entry DR CR CREDITORS A/C Purchase Returns 26,500 PURCHASE RETURNS A/C Creditors 26,500

Correcting Error Dr Creditors a/c Cr Purchase Returns 500 Suspense 26,500 Purchase Returns 10,000 Purchase Returns a/c Creditors 500 Creditors 10,000 Suspense a/c Creditors 26,500

Journal Entry DR CR Purchase Returns 500 Creditors 10,000 26,500 Suspense

Alternative Journal DR CR Purchase returns 10,500 Creditors 16,000 Suspense 26,500

Corrected Net Profit - + Purchase Returns (Dr Column) Therefore - minus

Balance Sheet Creditors are a Liability Therefore Dr ENTRY is a minus for Creditors in Creditors: amounts falling due within 1 Year.