Acca financial Accounting (FA) Study Text ac ca (FA)

The trial balance, errors and suspense accounts 

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KAPLAN PUBLISHING

 

Errors where the trial balance still balances 

Even if the trial balance still balances, there may be errors of posting into the 

ledger accounts. This may distort the information presented in the statement of 

financial position and statement of profit or loss. 

Consider the example of accounting for a cash sale of $1,000 with the following 

accounting entries made in the ledgers: 

Debit Non-current assets  $1,000 

Credit Trade payables 

$1,000 

An equal value of debits and credits has been posted into the ledgers, and the 

trial balance will agree, but the accounting entries are wrong. Consequently, the 

balances for non-current assets and trade payables will be overstated by 

$1,000. In addition, the balances for the bank balance and sales revenue will be 

understated by $1,000. This will be corrected by a journal adjustment. 

In this example, the net effect is that sales revenue and profit for the year in the 

statement of profit or loss has been understated by $1,000. In the statement of 

financial position, non-current assets and trade payables have been overstated, 

and the bank balance has been understated, each by $1,000. 

The correcting entries required are as follows: 

Debit Cash account  

$1,000 

Credit Non-current assets  $1,000 

Debit Trade payables 

$1,000 

Credit Sales revenue 

$1,000