Chapter 11 Control Systems: Errors and Suspense accounts

1. Chapter 11Control Systems: Errors and Suspense accounts

2. Errors that have no effect on the trial balance totals include: • Errors of omission • Compensating errors • Errors of commission • Errors of complete reversal • Errors of principle • Errors of original entry • Transposition errors

3. A Brief Description of Each Error • Errors of omission Absolutely no entry was made in the ledger. • Compensating errors Errors that cancel each other. • Errors of commission Entries are made on the correct sides but in the wrong personal accounts.

4. A Brief Description of Each Error • Errors of complete reversal Entries made in the correct accounts but each item is recorded on the incorrect side. • Errors of principle Correct amounts recorded in the wrong class of accounts.

5. A Brief Description of Each Error • Errors of original entry The incorrect amount was recorded on the correct sides of each account. • Transposition errors The digits for the transaction amounts are rearranged.

6. Errors that have no effect on the trial balance totals include: Worked Example Show the journal entries to correct the following errors. Make all adjustments on 31 Dec. 2009 (a) The purchase of a van on credit from Van Plus Ltd. for $143 900 had been completely omitted from the records. (b) The sales journal and the purchases journal were each over-added by $2 200.

7. Errors that have no effect on the trial balance totals include: Worked Example (c) A credit purchase of goods from R. Francis for $500 was entered in B. Francis account. (d) An electricity payment by cheque $75 was entered on the receipts side of the bank account and the wrong side of the electricity account.

8. Errors that have no effect on the trial balance totals include: Worked Example (e) Rental income of $7520 had been entered in the sales account. (f) A sale of goods for $900 to S. Angel was entered in the ledgers, both on the credit and debit sides, as $600. (g) A cheque payment to J. Mark for $9731 was entered in the accounts as $1397.

9. Errors that have no effect on the trial balance totals include: Solution to Worked Example

10. Errors that have no effect on the trial balance totals Solution to Worked Example

11. Errors that have no effect on the trial balance totals Solution to Worked Example

12. Errors that have no effect on the trial balance totals include: These errors will cause the trial balance totals to disagree resulting in one side being larger than the other. When the trial balance totals do not agree a suspense account is created as a temporary means of getting the totals to be the same. The difference is normally caused by several errors. Each error must be corrected with the aid of a suspense account.