Presentation on theme: "Delivering Excellence in Learning Basic Accounting II Errors and the Trial Balance The Suspense Account."— Presentation transcript:
Delivering Excellence in Learning Basic Accounting II Errors and the Trial Balance The Suspense Account
Delivering Excellence in Learning Trial Balance Re-Cap In pairs solve the Trial balance Remember the debit and credit sides need to be equal Use the DEAD CLIC rule!
Delivering Excellence in Learning As we know a trial balance should always balance! Discuss with a partner reasons WHY the trial balance may not balance. Try to think of at least 3 examples
Errors leading to an imbalance in the Trial Balance Single Entry –If only one side of the entry has been made in the Main ledger e.g. a cash sale for £50 has been entered into the DR side of the cash book but no entry made in Sales account. Transposition Error –The digits in a figure are transposed or (swapped) e.g Rent for £438 has been entered as CR cash book £438 DR Rent £483
Delivering Excellence in Learning Errors leading to an imbalance in the Trial Balance Balancing Error –If a ledger balance has been calculated incorrectly and then transferred onto the trial balance Omission –If a balance of a ledger account is omitted from the trial balance Transfer –Ledger balances are incorrectly transferred to the Trial Balance
Delivering Excellence in Learning Errors which do NOT cause an imbalance in the Trial Balance Error of Original Entry –Both entries in the main ledger have been made using the wrong amount Error of Omission –Entry is completely omitted from the ledger accounts Error of Reversal –The amount is correct but have been posted on the wrong sides of both accounts
Delivering Excellence in Learning Errors which do NOT cause an imbalance in the Trial Balance Error of Commission –The double entry amount is correct but has been posted to the wrong account of the same type of account e.g. £50 Telephone has been entered as Cr Cash Book Dr Electricity. Error of Principle –Similar to an error of commission where the amount is correct but the entry has been posted to the wrong type of account e.g computer paper posted to computer fixed asset account.
Delivering Excellence in Learning Activity Individually Thinking of the different types of errors decide whether the error Would or Would NOT cause the trial balance to be imbalanced.
Delivering Excellence in Learning Using the Suspense Account Sometimes the trial balance will not balance When this happens the introduction of a Suspense account is used The suspense account is a temporary measure It is to be cleared once the errors are found
Delivering Excellence in Learning How it works The trial balance is balance and does not add up!£ Total109,344109,444 A Suspense account balance is entered so that it does.£ Suspense 100 Total109,444109,444
Delivering Excellence in Learning Suspense account The figure is entered into the suspense account on the side it has been entered in the TB Suspense Account Opening Bal100
Delivering Excellence in Learning Clearing the suspense account It has been discovered that cash purchases of £100 were correctly entered into the cash account but no entry was made in the purchases account. A journal is needed to correct the error DrCr Purchases100 Suspense100
Delivering Excellence in Learning Suspense account The figure can now be entered into the suspense account now the error has been found The aim is always to clear the suspense account Suspense Account Opening Bal100Purchases100
Delivering Excellence in Learning Lets work together Complete assessment task 1.4 PA1 Complete assessment task 1.3 PA2 on your own or with a partner
Delivering Excellence in Learning Assessment style question You will be given a trial balance which does NOT balance Step 1 – Draft the trial balance (in pencil) Step 2 – Look at the journal entries that are provided in the question Step 3 – Re- Draft the Trial balance to reflect the changes - it should now balance
Delivering Excellence in Learning Journal entries The journal is a book of PRIME ENTRY Just like the trial balance they must balance They are an instruction to what needs to be posted to the main ledger They have the name of the account and whether it will be a debit or a credit
Delivering Excellence in Learning Extension Activity I have put a challenging extension activity on the VLE for you to access if you would like to develop your knowledge.
Delivering Excellence in Learning Exam Preparation Log onto your AAT account We will work through the first exam scenario