CDA COLLEGE ACC101: BOOK KEEPING II Lecture 9 Lecture 9 Lecturer: Kleanthis Zisimos.

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Presentation transcript:

CDA COLLEGE ACC101: BOOK KEEPING II Lecture 9 Lecture 9 Lecturer: Kleanthis Zisimos

Lecture Topic List Correction of errors Correction of errors Suspense account Suspense account

Unobserved Errors in Trial Balance Some errors do not affect the balance of the Trial Balance and the debit side is equal to the credit side. We have the following unobserved errors: Some errors do not affect the balance of the Trial Balance and the debit side is equal to the credit side. We have the following unobserved errors: 1. Duplication errors 2. Errors of principle (Recording a transaction to a wrong account with corrected debit or credit side) 3. Complete omission of a transaction 4. Compensating errors. Errors which are coincidently equal and opposite to one another

Unobserved Errors in Trial Balance 5. Errors of original entry 6. Reversal of entries 7. Error of commission

Observed Errors in Trial Balance If the two columns of the trial balance are not equal then the following errors might have occurred. If the two columns of the trial balance are not equal then the following errors might have occurred. 1. Partly omission of a double entry transaction. 2. Error of transposition. When two digits in an amount are accidentally recorded the wrong way around. 3. Wrong transportation of an account balance in the ledger

Suspense Account A suspense account is an account showing a balance equal to the difference in a trial balance. A suspense account is an account showing a balance equal to the difference in a trial balance. It is a temporary account and it is opened up until is sorted out. It is a temporary account and it is opened up until is sorted out. A suspense account is opened up for 2 reasons A suspense account is opened up for 2 reasons 1. In order to balance the trial balance and afterwards find the error which caused the difference 2. If the bookkeeper does not know which account to post one side of a transaction.

Discussion Exercise The credit side of the trial balance of Toy Robot Ltd is not 7010 more than the debit side. After the investigation the following errors have occurred The credit side of the trial balance of Toy Robot Ltd is not 7010 more than the debit side. After the investigation the following errors have occurred 1.The book keeper has only credited cash a/c € 7000 for the acquisition of a delivery van 2. Cash sales for € 2000 were credited to sales as € Open the suspense account and post the corrections Open the suspense account and post the corrections