Subject: Other
The account opened to rectify the previous year’s one-sided errors is called suspense account. It is opened for a temporary period only. Suspense account shows no balance after the rectification of all errors and it disappears automatically. The opening of suspense account does not mean that errors detected should be left unrectified.
A suspense account is opened with a purpose to correct the previous year’s one-sided errors. It is used for the temporary period only. One-sided errors affect only on one side of an account. Therefore, rectification of one-sided errors is done by opening suspense account. Opening suspense account makes possible to prepare journal entries for correcting one-sided errors. Suspense account shows no balance after rectifying one-sided errors and disappears automatically.
A suspense account is opened when one-sided errors detected after preparation of trial balance. It is the account opened for the temporary period till one-sided errors are rectified. A suspense account is debited when the debit total of trial balance remains less. It is credited by the amount short of the credit total of trial balance. The suspense account does not show any balance after the rectification of all one-sided errors. Therefore, the utilities for opening suspense account are as follows:
A suspense account is opened for the temporary purpose of resolving one-sided errors. The account is of no use after all one-sided errors are rectified. Hence, the suspense account is dropped.
Errors in nominal accounts and store ledger affect either profit or loss of the business. The difference of incomes and expenses is either profit or loss. Symbolically, incomes-expenses = profit or (loss). The accounting equation describes that every error in nominal accounts and store ledger affects either profit or loss. The errors relating to the personal and real accounts neither affect profit nor loss. Therefore, the errors in nominal accounts and store ledger affects ultimately either profit or loss. Thus, errors in nominal accounts affect the accuracy of profit or loss shown by the profit and loss account.
Errors in nominal account | Effect either on profit or on loss | |
Profit | Loss | |
Error on debit side | Decreases | Increases |
Excess entry on debit side | Decreases | Increases |
Less amount entry or less total on debit side | Increases | Decreases |
Omission on debit side | Increases | Decreases |
Error on credit side | Increases | Decreases |
Excess entry on credit side | Increases | Decreases |
Less amount entry or less total on credit side | Decreases | Increases |
Omission on credit side | Decreases | Increases |
Rectify the following errors which were located after the preparation of trial balance:
Salary paid Rs.500 but wrongly debited to wages account.
Interest received Rs.200 but wrongly recorded in dividend account.
Interest paid to Ramesh Rs.300 and debited to his personal account.
Furniture purchased for Rs.7,000 and recorded in purchases account.
Rectification of Errors
Date | Particulars | LF | Debit Amount | Credit Amount |
a) | Salary a/c………………..Dr. | 500 | ||
To wages a/c | 500 | |||
(Being error rectified.) | ||||
b) | Dividend a/c…………….Dr. | 200 | ||
To interest received a/c | 200 | |||
(Being error rectified.) | ||||
c) | Interest a/c………………..Dr. | 300 | ||
To Ramesh’s a/c | 300 | |||
(Being error rectified.) | ||||
d) | Furniture a/c………………..Dr. | 7,000 | ||
To purchase a/c | 7,000 | |||
(Being error rectified.) |
Rectify the following errors which were located after the preparation of trial balance:
Salary paid to Sulav Rs.4,000 and debited to his personal accounts.
Rent paid to land lord Mr.Y Rs.2,000 and debited to his personal account.
Purchase book was overcast by Rs.1,000.
Purchase return book was under cast by Rs.500.
Rectification of Errors
Date | Particulars | LF | Debit Amount | Credit Amount |
a) | Salary a/c……………….Dr. | 4,000 | ||
To Sulav’s a/c | 4,000 | |||
(Being errors rectified.) | ||||
b) | Rent a/c……………….Dr. | 2,000 | ||
To Mr.Y’s a/c | 2,000 | |||
(Being errors rectified.) | ||||
c) | Suspense a/c……………….Dr. | 1,000 | ||
To purchase a/c | 1,000 | |||
(Being errors rectified.) | ||||
d) | Suspense a/c……………….Dr. | 500 | ||
To purchase return a/c | 500 | |||
(Being errors rectified.) |
Rectify the following errors which were located after the preparation of trial balance:
Rupesh returned goods worth Rs.3,000 but no entry has been passed in the books.
Goods worth Rs.1,200 purchased for personal use was debited to personal account.
Furniture worth Rs.2,000 purchased for personal use was debited to purchase account.
Salaries of Rs.1,000 paid to Rupesh wrongly debited to his personal account.
Rectification of Errors
Date | Particulars | LF | Debit Amount | Credit Amount |
a) | Sales return a/c………………Dr. | 3,000 | ||
To Rupesh’s a/c | 3,000 | |||
(Being errors rectified.) | ||||
b) | Binita’s a/c………………Dr. | 1,200 | ||
To purchase a/c | 1,200 | |||
(Being errors rectified.) | ||||
c) | Drawing a/c………………Dr. | 2,000 | ||
To purchase a/c | 2,000 | |||
(Being errors rectified.) | ||||
d) | Salary a/c………………Dr. | 1,000 | ||
To Rupesh’s a/c | 1,000 | |||
(Being errors rectified.) |
Write out the journal entries to rectify the following errors located after the preparation of trial balance:
Credit sales to Rita Rs.2,000 debited to her account Rs.200.
Advertisement expenses Rs.300 was posted in the ledger as Rs.3,000.
Rs.1,000 cash paid to Hari posted as Rs.100 in Hari’s account.
Sales of Rs.550 to Makalu Ltd. Were recorded in the sales book as Rs.505.
Rectification of Errors
Date | Particulars | LF | Debit Amount | Credit Amount |
a) | Rita’s a/c………………Dr. | 1,800 | ||
To suspense a/c | 1,800 | |||
(Being errors rectified.) | ||||
b) | Suspense a/c………………Dr. | 2,700 | ||
To advertisement a/c | 2,700 | |||
(Being errors rectified.) | ||||
c) | Hari’s a/c………………Dr. | 900 | ||
To suspense a/c | 900 | |||
(Being errors rectified.) | ||||
d) | Suspense a/c………………Dr. | 45 | ||
To sales a/c | 45 | |||
(Being errors rectified.) |
Rectify the following errors which were located after the preparation of trial balance:
Credit purchases of Rs.8,000 from Shyam recorded as credit sales.
Credit sales to Rajendra of Rs.2,000 recorded as credit purchases.
Interest received Rs.250 but recorded as interest paid.
Cash received from Mr.X Rs.1,000 as cash paid to Mr.X.
Rectification of Errors
Date | Particulars | LF | Debit Amount | Credit Amount |
a) | Purchase a/c……………….Dr. | 8,000 | ||
Sales a/c……………….Dr. | 8,000 | |||
To Shyam’s a/c | 16,000 | |||
(Being errors rectified.) | ||||
b) | Rajendra’s a/c……………….Dr. | 4,000 | ||
To sales a/c | 2,000 | |||
To purchase a/c | 2,000 | |||
(Being errors rectified.) | ||||
c) | Cash a/c……………….Dr. | 500 | ||
To interest a/c | 500 | |||
(Being errors rectified.) | ||||
d) | Cash a/c……………….Dr. | 2,000 | ||
To Mr.X a/c | 2,000 | |||
(Being errors rectified.) |
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