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

Types of Errors The errors that affect the balancing of the trial balance Those errors that are not revealed by the trial balance. In the former a Suspense account is used temporarily to balance the trial balance.

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 Suspense 26,500 Purchase Returns 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.