The Suspense Account That Would Not Close
Mpho's trial balance at 31 December totals P246,800 on the debit side and P246,300 on the credit side. She opens a suspense account for P500. On investigation she finds: (i) a credit sale of P900 to A. Sithole was entered in the sales day book as P90; (ii) a payment of P250 for rent was posted twice to the rent account; (iii) the purchases account balance of P4,300 was listed in the trial balance as P3,400; (iv) a cheque for P600 received from a debtor was correctly entered in the cash book but not posted to the debtor's account.
1. For each of the four errors, state whether it affects the trial balance agreement and whether it is an error of principle, commission, omission, original entry or a posting/arithmetical error.
Read the worked answer
| Error | Affects trial balance? | Type |
|---|---|---|
| (i) Sale P900 entered as P90 | No - both debits and credits are equally wrong | Error of original entry |
| (ii) Rent posted twice | No - same account, both sides equally inflated | Error of commission (posting) |
| (iii) Purchases P4,300 listed as P3,400 | Yes - P900 short on debit side | Arithmetical/extraction error |
| (iv) Cheque not posted to debtor's account | Yes - debit missing, P600 | Error of omission (one-sided) |
Reasoning: the trial balance only fails when one side of a double entry is missing or misstated. Errors (i) and (ii) are self-balancing - both sides move together - so the suspense account cannot reveal them; they are found only by checking source documents and ledger postings.
Examiner tip: the classic trap is assuming all errors create suspense. Only one-sided errors do. Note (ii) inflates the rent expense and understates profit without any trial balance imbalance.
2. Calculate the corrected suspense account balance and show the journal entries needed to clear it.
Read the worked answer
Suspense account
| P | P | ||
|---|---|---|---|
| Difference (opening) | 500 | (iii) Purchases correction | 900 |
| (iv) Debtor correction | 600 | ||
| 1,100 | 900 |
Hmm - this does not balance, so the direction of the opening difference must be checked. Debits P246,800 exceed credits P246,300 by P500, so the suspense account must be credited P500 to make the trial balance balance. Redo:
| P | P | ||
|---|---|---|---|
| (iv) Debtor | 600 | Opening difference (credit) | 500 |
| (iii) Purchases | 900 | ||
| Balance c/d (residual) | 200 | ||
| 1,100 | 1,100 |
A residual of P200 remains - a further undiscovered error. It must be carried forward, not written off to profit.
Journals:
- Dr Suspense P600; Cr A. Sithole P600 (omit posting)
- Dr Purchases P900; Cr Suspense P900 (extraction error)
- Dr Suspense P500 (opening correcting entry)
Key point: never close a suspense account by transferring the balance to the income statement - that hides errors.