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“Draft accounts have been prepared before the error has been corrected the correction will revise the balance(s) on the affected account(s). Thus the final accounts will be affected by the correction. Whether it is the statement of profit or loss or the statement of financial position that is affected, will depend on whether the account records income, expense asset, liability or capital.”
My question is that are these draft accounts suspense account?Nor all errors cause a trial balance not to balance. Eg, debiting a cash payment to wages instead of rent or debiting an amount to repairs instead of non-current assets will not result in an out of balance TB.
Only one-sided errors make TBs not balance. Eg Cr Cash 810, Dr Expense 180 means that Crs exceed Drs by 630. The suspense account is simply an invention to make the TB balance, so that here it would show Dr 630.
The correction of the error would then be:
Cr Suspense account 630
Dr Expenses 630 (so that it now contains 630 + 180 = 810, as it should)Sir I want to ask that these draft account entitled above are suspense account right?
Draft accounts are simply that: the accounts that are produced initially from the trial balance. They might or might not contain a suspense account.
There might then be adjustments to those to produce the final accounts. Examples of adjustments are:
Correcting errors, perhaps to eliminate a suspense account, or other corrections.
Putting through that year’s depreciation
Assessing the adequacy of the allowance for receivables and correcting that where necessary
Dealing with accruals and prepayments.
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