Question

SALES BOOK IS UNDERCASTE BY 500. RECTIFY THE ERRORS AND PASS THE JOURNAL ENTRIES

Answer 1

Errors that affect one account will affect the agreement of the Trail balance. If the errors cannot be located immediately and rectified, then the difference in trial balance is kept in a separate account called ‘suspense account’.

Suspense account is a temporary and imaginary account, which is closed later when the errors are located. The artificial tallying of the trial balance by the introduction of suspense account enables the Final Accounts to be prepared even before the location of errors.

If the suspense account shows debit balance, it is shown in the asset side of the balance sheet. If it shows credit balance, it is shown in the liability side.

On locating the errors in the beginning or in the course of next year, rectifying entries would be passed and when all the errors have been completely rectified the suspense Account will show no balance.

In the case of one-sided errors, if they are to be rectified through journal entries, the suspense account can be used for the required debit or credit depending upon the nature of error. For example, the purchase book is under cast by Rs.500.