I understand that the TB isn’t balance but there’s things I don’t understand:
1) how can there only be 1 entry made in the ledger, whenever a posting is made it’s always a double entry?
2) the cr balance of 4957 to balance the tb, how is that made? There’s no account we have debited to then post the credit entry to the suspense account, the 4957 is just the correction needed but that posting hasn’t actually been made, if that makes sense?
1. Because someone has made a mistake – it happens in real life!!
2. Not all the entries are ‘real entries’ As I explain in the lecture, the suspense account is not a ‘real’ account – it is there just for us to keep a check on the errors that we have found.
1) Sorry John, I didn’t mean, how as in why would anyone do that. I meant literally how, as for example when we post entries in our accounting software it physically won’t allow you post to unless it is balanced. So a one sided entry wouldn’t go through?
2) again, apologies, I don’t understand. I completely get that it’s just a holding account until we can post the entries to the correct place, but in order for us to keep a check that opening balance would need to be there, I’m confused as to how it would be posted there as again it wouldn’t have a debit entry in a specific account, if that makes sense?
1. When using accounting software it is unlikely to be relevant because the software forces a double entry. It is really relevant when the entering is done ‘by hand’ in which case it is very easy to make mistakes such as entering a debit somewhere and then forgetting to enter the credit.
2. The same applies here. Assume always that the entering is being done manually.
On 1 October 20X6 Nco had 400000 25c ordinary shares in issue.On January 20X7.there was a right issue of one of five at 1.50.the entry in the share premium account was omitted in error and as a result the trial balance at 30th September 20X7.did not agree What balance would have been entered in the Suspense account when it was opened? A.400,000 Dr B.A.400,000 Cr C.100,000 DR D.100,000 CR
Isn’t the answer suppose to to a debit of 100,000 so that the correct answer is then credited to the premium account.
However in the revision kit of Bpp their answer is D.kindly help me understand this
I am really sorry to ask this here . I know I was suppose to use Ask the tutor but I find it difficult to find what I post there
Although the correcting entry is as you have stated, the question asks what balance would be on the suspense account when it was opened. The credit entry in the share premium account was missing and so a suspense account will have been opened with a credit balance in order to make the trial balance balance. (When the correcting entry is made, the balance on the suspense account would then end up as being zero)
Thanks for the lectures. I paused your video and tried example 2 on my own, and my suspense account balanced. The only thing was that our entries were on opposite sides (everything on my debit side was on your credit side). Is there any danger of understanding it this way for the exam?
Although you cannot be asked to write up any t-accounts in the exam, you can be expected to know the correct entries. So it is important that you do realise your mistake.
Hi sir, in part (c) why don’t we Cr Cash 180, Dr Elec Expenses 180 directly on the account and adjust it on the trial balance , and then the Trial Balance would be
If you are referring the the electricity expense, it is given in the question. (I assume that you have downloaded the free notes that go with the lectures?)
Thank you for this amazing lecture professor however i noticed that in the last adjustment, if the question were to say miscasting in purchase day book instead of purchase A/c would that result in miss balance in trail balance? What is the difference between purchase a/c and purchase day book a/c? ( because both purchase an trade payble would be undercast by the amount bcz of miscasting error and trail balance wouldnt be affected at all if the question were to day purchase day book).
it would be helpfull with your expert knowledge on this. this has been bugging me for some time.
At question C, we work with the error on the suspense account.
Considering that this error will definitely arise in the bank recon, is it safe to say that we leave this error now because it will balance throughout the TB, but leave it so that in the bank recon it can be dealt with?
The bank statement will show the $200 payment And the books will show $20 Accountant will adjust later on with $180 correction.
Does this mean we do the suspense account before we do the bank recon?
Hi SIR, Sir I wanna know that the errors which doesn’t effects the Trial Balance, does these errors effect the Financial Statements? I’ll be thankful for your time.
On suspense accounts example 2 – I ignored part (c) but for the wrong reason. I could see that the mistake had been recorded throughout, and so would not make the trial balance unbalanced, but I looked at part (b), which is the balance on the electricity account should be £615. I assumed that this superceded part (c) and meant that the electricity account was now correct. I’m sure this would be clearer in an exam question scenario but just in case it isn’t, should we always assume that all points need to be addressed in this type of question scenario, and that there are no “curved balls”? The problem I have is because the exam appears to be full of curved balls in its questions, the trick is knowing what is one, and what isn’t!!
Part (b) says that the balance was recorded wrongly on the trial balance. Part (c) says that an entry had been recorded wrongly in the account. Therefore the balance on the account must have been wrong, but it is the balance that had been recorded.
Fo the suspense question example no 2 on your notes i dont get the below part could you explain a bit further please
When accounting for the telephone accrual of $70 at the year end, a single entry had been made. It was the expense account entry that had been missed out
the normal double entry for the above is cr accruals with 70 and dr telephone with 70
so would it not be cr accruals with 70 and dr suspense with 70 as the telephone expense had been missed out
In Example 2 C) One cash payment for electricity of $200 had been recorded throughout as $20
I can not recognize when the error applies to both accounts in this case in electricity a/c and cash a/c. I understood that only in cash account have mistake. This means in electricity a/c still Dr of $200.There are many similar questions that confuse me.
sm8980 says
Hi John,
I understand that the TB isn’t balance but there’s things I don’t understand:
1) how can there only be 1 entry made in the ledger, whenever a posting is made it’s always a double entry?
2) the cr balance of 4957 to balance the tb, how is that made? There’s no account we have debited to then post the credit entry to the suspense account, the 4957 is just the correction needed but that posting hasn’t actually been made, if that makes sense?
Thank you
John Moffat says
1. Because someone has made a mistake – it happens in real life!!
2. Not all the entries are ‘real entries’ As I explain in the lecture, the suspense account is not a ‘real’ account – it is there just for us to keep a check on the errors that we have found.
sm8980 says
1) Sorry John, I didn’t mean, how as in why would anyone do that. I meant literally how, as for example when we post entries in our accounting software it physically won’t allow you post to unless it is balanced. So a one sided entry wouldn’t go through?
2) again, apologies, I don’t understand. I completely get that it’s just a holding account until we can post the entries to the correct place, but in order for us to keep a check that opening balance would need to be there, I’m confused as to how it would be posted there as again it wouldn’t have a debit entry in a specific account, if that makes sense?
John Moffat says
1. When using accounting software it is unlikely to be relevant because the software forces a double entry. It is really relevant when the entering is done ‘by hand’ in which case it is very easy to make mistakes such as entering a debit somewhere and then forgetting to enter the credit.
2. The same applies here. Assume always that the entering is being done manually.
Mulalu says
On 1 October 20X6 Nco had 400000 25c ordinary shares in issue.On January 20X7.there was a right issue of one of five at 1.50.the entry in the share premium account was omitted in error and as a result the trial balance at 30th September 20X7.did not agree
What balance would have been entered in the Suspense account when it was opened?
A.400,000 Dr
B.A.400,000 Cr
C.100,000 DR
D.100,000 CR
Isn’t the answer suppose to to a debit of 100,000 so that the correct answer is then credited to the premium account.
However in the revision kit of Bpp their answer is D.kindly help me understand this
I am really sorry to ask this here . I know I was suppose to use Ask the tutor but I find it difficult to find what I post there
John Moffat says
Although the correcting entry is as you have stated, the question asks what balance would be on the suspense account when it was opened. The credit entry in the share premium account was missing and so a suspense account will have been opened with a credit balance in order to make the trial balance balance. (When the correcting entry is made, the balance on the suspense account would then end up as being zero)
Mulalu says
Thank you so much
John Moffat says
You are welcome 🙂
Somtee says
Hello John,
Thanks for the lectures. I paused your video and tried example 2 on my own, and my suspense account balanced. The only thing was that our entries were on opposite sides (everything on my debit side was on your credit side). Is there any danger of understanding it this way for the exam?
John Moffat says
Although you cannot be asked to write up any t-accounts in the exam, you can be expected to know the correct entries. So it is important that you do realise your mistake.
nghiaht2210 says
Hi sir, in part (c) why don’t we Cr Cash 180, Dr Elec Expenses 180 directly on the account and adjust it on the trial balance , and then the Trial Balance would be
Cash as bank: 218 – 180 = 38
Electricity expenses: 516 + 180 + 99 = 795
Can I do it or just ignore part (c) on the trial balance?
trennox says
The thing I struggle with is when you get the correction journal how to post these to the t accounts
Thanks
Jock774 says
How do you find 516 or from where did you get this number?
John Moffat says
If you are referring the the electricity expense, it is given in the question. (I assume that you have downloaded the free notes that go with the lectures?)
Jock774 says
yes
pkarki says
Thank you for this amazing lecture professor
however i noticed that in the last adjustment, if the question were to say miscasting in purchase day book instead of purchase A/c would that result in miss balance in trail balance?
What is the difference between purchase a/c and purchase day book a/c?
( because both purchase an trade payble would be undercast by the amount bcz of miscasting error and trail balance wouldnt be affected at all if the question were to day purchase day book).
it would be helpfull with your expert knowledge on this. this has been bugging me for some time.
John Moffat says
This is all explained in the lectures on Books of Prime Entry 🙂
andreaskraken says
This lesson made a lot of sense and covered everything I had a problem with
Well delivered
Thank you so much
John Moffat says
Thank you for your comment 🙂
Asif110 says
Wonderfully delivered lecture !
johnwecke says
Hi John.
At question C, we work with the error on the suspense account.
Considering that this error will definitely arise in the bank recon, is it safe to say that we leave this error now because it will balance throughout the TB, but leave it so that in the bank recon it can be dealt with?
The bank statement will show the $200 payment
And the books will show $20
Accountant will adjust later on with $180 correction.
Does this mean we do the suspense account before we do the bank recon?
Thanx
John Moffat says
This error does not affect the suspense account at all because the trial balance will still balance.
The most likely way in which the error is discovered is when the bank reconciliation is done.
anoshb141 says
Hi SIR,
Sir I wanna know that the errors which doesn’t effects the Trial Balance, does these errors effect the Financial Statements?
I’ll be thankful for your time.
tracyjaybee says
On suspense accounts example 2 – I ignored part (c) but for the wrong reason. I could see that the mistake had been recorded throughout, and so would not make the trial balance unbalanced, but I looked at part (b), which is the balance on the electricity account should be £615. I assumed that this superceded part (c) and meant that the electricity account was now correct. I’m sure this would be clearer in an exam question scenario but just in case it isn’t, should we always assume that all points need to be addressed in this type of question scenario, and that there are no “curved balls”? The problem I have is because the exam appears to be full of curved balls in its questions, the trick is knowing what is one, and what isn’t!!
Thanks
John Moffat says
There is no ‘curve ball’.
Part (b) cannot have superceded part (c).
Part (b) says that the balance was recorded wrongly on the trial balance. Part (c) says that an entry had been recorded wrongly in the account. Therefore the balance on the account must have been wrong, but it is the balance that had been recorded.
John Moffat says
murphyjohn89: The normal double entry is not as you have written it.
It is Dr Telephone (because it is an expense) and Cr Accruals (for the liability).
Have you watched the free lectures on accruals?
murphyjohn89 says
Fo the suspense question example no 2 on your notes i dont get the below part could you explain a bit further please
When accounting for the telephone accrual of $70 at the year end, a single entry had been
made. It was the expense account entry that had been missed out
the normal double entry for the above is cr accruals with 70 and dr telephone with 70
so would it not be cr accruals with 70 and dr suspense with 70 as the telephone expense had been missed out
so to take it out of suspense you would
dr telephone 70
cr suspense 70
steli83 says
Hi sir,
I have little silly question.
In Example 2
C) One cash payment for electricity of $200 had been recorded throughout as $20
I can not recognize when the error applies to both accounts in this case in electricity a/c and cash a/c. I understood that only in cash account have mistake. This means in electricity a/c still Dr of $200.There are many similar questions that confuse me.
Thank you in advance!
Ermali says
well same here, i thought it was only on CASH A/C
SonaliThombe says
the statement says that it has been recorded THROUGHOUT means the entry has been made as dr: electricity expense 20 and cr: cash a/c 20
John Moffat says
That is correct 🙂