ACCAF3SuspenseAccount那一章的讲义

SuspenseaccountsanderrorcorrectionbyNeilStein25Jul2003

ProfessionalScheme,CertifiedAccountingTechnicianSchemeRelevanttoPaperB1,Paper1.1andPaper3Suspenseaccountsanderrorcorrectionarepopulartopicsforexaminersbecausetheytestunderstandingofbookkeepingprinciplessowell.Asuspenseaccountisatemporaryrestingplaceforanentrythatwillendupsomewhereelseonceitsfinaldestinationisdetermined.Therearetworeasonswhyasuspenseaccountcouldbeopened:abookkeeperisunsurewheretopostanitemandentersittoasuspenseaccountpendinginstructionsthereisadifferenceinatrialbalanceandasuspenseaccountisopenedwiththeamountofthedifferencesothatthetrialbalanceagrees(pendingthediscoveryandcorrectionoftheerrorscausingthedifference).Thisistheonlytimeanentryismadeintherecordswithoutacorrespondingentryelsewhere(apartfromthecorrectionofatrialbalanceerror –seeerrortype8inTable1).Table1:TypesorerrorErrortypeSuspenseaccountinvolved?1Omission–atransactionisnotrecordedatallNo2Errorofcommission–anitemisenteredtothecorrectsideofthewrongaccount(thereisadebitandacredithere,sotherecordsbalance)No3Errorofprinciple–anitemispostedtothecorrectsideofthewrongtypeofaccount,aswhencashpaidforplantrepairs(expense)isdebitedtoplantaccount(asset)No(errorsofprinciplearereallyaspecialcaseoferrorsofcommission,andonceagainthereisadebitandacredit)4Erroroforiginalentry–anincorrectfigureisenteredintherecordsandthenpostedtothecorrectaccountNoExample:Cash￡1,000forplantrepairsisenteredas100;plant￡repairsaccountisdebitedwith100￡5Reversalofentries–theamountiscorrect,theaccountsusedarecorrect,buttheaccountthatshouldhavebeendebitediscreditedandviceversaExample:Factoryemployeesareusedforplantmaintenance:Correctentry: NoDebit:PlantmaintenanceCredit:FactorywagesEasilydonethewrongwayround6Additionerrors

–figuresareincorrectlyaddedinaledgeraccount

Yes7Postingerror –aanentrymadeinonerecordisnotpostedatallbanentryinonerecordisincorrectlypostedtoanother

YesExamples:cash ￡10,000enteredinthecashbookforthepurchaseofacaris:anotpostedatallbpostedtoMotorcarsaccountas1,000￡8Trialbalanceerrors –abalanceisomitted,orincorrectlyextracted,inpreparingYesthetrialbalance9Compensatingerrors–twoequalandoppositeerrorsleavethetrialbalancing(thistypeoferrorisrare,andcanbebecauseadeliberateseconderrorhasbeenmadetoforcethebalancingoftherecordsortoconcealafraud)

balance

Yes,tocorrecteachoftheerrorsasdiscoveredForexaminationpurposeswearemoreoftenconcernedwiththesecondofthese –differencesanderrorcorrection.TypesoferrorBeforewelookattheoperationofsuspenseaccountsinerrorcorrection,weneedtothinkabouttypesoferror–notalltypesaffectthebalancingoftherecordsandhencethesuspenseaccount.RefertoTable1.CorrectingerrorsErrors1to5,whendiscovered,willbecorrectedbymeansofajournalentrybetweentheaccountsaffected.Errors6to9alsorequirejournalentriestocorrectthem,butonesideofthejournalentrywillbetothesuspenseaccountopenedforthedifferenceintherecords.Type8,trialbalanceerrors,aredifferent.Asthesuspenseaccountrecordsthedifference,anentrytoitisneeded,becausetheerroraffectsthedifference.However,thereisnoledgerentryfortheothersideofthecorrection–thetrialbalanceissimplyamended.AnillustrativequestionThisisQuestion2fromtheDecember1998AccountingFrameworkexamination.ThiswastheFoundationstageaccountingpaperuntilthenewPaper1.1,PreparingFinancialStatementsexaminationcameintoeffectinDecember2001.ThebookkeepingsystemofTurnerLimitedisnotcomputerised,andat30September1998thebookkeeperwasunabletobalancetheaccounts.Thetrialbalancetotalswere:Debit ￡1,796,100Credit 1,852,817￡Nevertheless,heproceededtopreparedraftfinancialstatements,insertingthedifferenceasabalancingfigureinthebalancesheet.Thedraftprofitandlossaccountshowedaprofitof 141,280fortheyear￡ended30September1998.Hethenopenedasuspenseaccountforthedifferenceandbegantocheckthroughtheaccountingrecordstofindthedifference.Hefoundthefollowingerrorsandomissions:￡8,980–thetotalofthesalesreturnsbookforSeptember1998,hadbeencreditedtothepurchasesreturnsaccount.￡9,600paidforanitemofplantpurchasedon1April1998hadbeendebitedtoplantrepairsaccount.Thecompanydepreciatesitsplantat20%perannumonastraightlinebasis,withproportionaldepreciationintheyearofpurchase.ThecashdiscounttotalsforthemonthofSeptember1998hadnotbeenpostedtothenominalledgeraccounts.Thefigureswere:Discountallowed836￡Discountreceived919￡￡580insuranceprepaidat30September1997hadnotbeenbroughtdownasanopeningbalance5. Thebalanceof 38,260￡onthetelephoneexpenseaccounthadbeenomittedfromthetrialbalance6. Acarheldasafixedassethadbeensoldduringtheyearfor￡4,800.Theproceedsofsalewereenteredinthecashbookbuthadbeencreditedtothesalesaccountinthenominalledger.Theoriginalcostofthecar12,000,￡andtheaccumulateddepreciationtodate8,000,￡wereincludedinthemotorvehiclesaccountandtheaccumulateddepreciationaccount.Thecompanydepreciatesmotorvehiclesat25%perannumonastraightlinebasiswithproportionatedepreciationintheyearofpurchasebutnoneintheyearofsale.Required:aOpenasuspenseaccountforthedifferencebetweenthetrialbalancetotals.Preparethejournalentriesnecessarytocorrecttheerrorsandeliminatethebalanceonthesuspenseaccount.Narrativesarenotrequired.(10marks)bDrawupastatementshowingtherevisedprofitaftercorrectingtheaboveerrors.(6marks)(16marks)DiscussionTheapproachtothequestionshouldbe:1Readtherequirementparagraphattheendofthequestion.2Attackthequestion –notethatnarrativesarenotrequired.Beginbyopeningthesuspenseaccount.Whichside?Moredebitisneededtobalancethetrialbalance,sodebitthesuspenseaccountwith 56,717. ￡Thendealwiththeerrorsinorder:Salesreturnsshouldhavebeendebitedtothesalesreturnsaccountandtheyhavebeencreditedtothepurchasesreturnsaccount.Therearetwoerrorshere–thewrongaccounthasbeenusedandanentrywhichshouldhavebeenadebithasbeenenteredasacredit.Thesuspenseaccountentrymustthereforebefor2x8,980￡or17,960￡.Anerrorofprinciple–nosuspenseaccountentry.Depreciationmustbeadjusted.Itemshavenotbeenposted,thereforethesuspenseaccountisinvolved.Effectivelyapostingerror–thesuspenseaccountisagaininvolved.5. Atrialbalanceerrormustaffectthesuspenseaccount –butnoledgerentry.Thisoneneedsthought.Takeitonesentenceatatime.Isthesuspenseaccountinvolved?No,becausewehaveanerrorofcommissionfollowedbysomeunrecordedtransactions.AttemptPart(a)ofthequestionbef orestudyingtheanswerasdetailedinTable2.Let ’snowturntoPart(b).Themostconvenientformatfortheansweristwocolumnsfor-and+.Setthemupandentertheadjustmentsappropriately.Whichoftheerrorsaffecttheprofit?Infacttheyalldo.AttemptPart(b)nowbeforelookingattheanswerdetailedinTable3.Table2:Answer–Part(A)SuspenseAccount￡￡Difference56,717Salesreturns8,980Discountreceived919Purchasesreturns8,980Discountallowed836Insurance580Telephone(trialbalance)38,26057,63657,636Journalentries￡

￡1Salesreturnsaccount

8,980Suspenseaccount

8,980Purchasesreturnsaccount8,980Suspenseaccount8,9802Plantaccount9,600Plantrepairsaccount9,600Depreciation(profitandlossaccount)960Plantdepreciationaccount9603Discountallowedaccount836Suspenseaccount836Suspenseaccount919Discountreceivedaccount9194Insuranceaccount580Suspenseaccount5805Trialbalance(noledgerentry)38,260Suspenseaccount38,2606Salesaccount4,800Motorvehiclesdisposalaccount4,800Motorvehiclesdisposalaccount12,000Motorvehiclesassetaccount12,000Motorvehiclesdepreciationaccount8,000Motorvehiclesdisposalaccount8,000Motorvehiclesdisposalaccount800Profitandlossaccount800Table3:Answer–Part(B)Adjustmenttoprofit-+￡￡Profitasindraftprofitandlossaccount141,2801Salesreturnsadjustment(2x8,980)￡17,9602Plant:reductioninrepairs9,600depreciation–6/12x20%x9,600￡9603Discountallowed836Discountreceived9194Insurance–openingbalanceomitted5805Telephoneexpenseomitted38,2606Profitonsaleofcar800Proceedstakenoutofsales4,80063,396152,599(63,396)Revisednetprofit89,203Somehintsonpreparingsuspenseaccounts? Doesacorrectioninvolvethesuspenseaccount?Thetypeoferrordeterminesthis.Practice,andstudyofTable1shouldensurethatyouseeimmediately