I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

 

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When the cause of the $162 discrepancy is tracked down, it is corrected by means of a journal entry. 

For example, the credit of $162 should be to purchases. The journal entry would be: 

DEBIT Suspense 

a/c 

$162 

CREDIT Purchases 

 

$162

To close off suspense a/c and correct error 

 

 

Three more examples are given below. 

2.6 Example: transposition error 

The bookkeeper of Mixem Gladly Co made a transposition error when entering an amount for sales in the 

sales account. Instead of entering the correct amount of $37,453.60 they entered $37,543.60, 

transposing the 4 and 5. The trade accounts receivable were posted correctly, and so when total debits 

and credits on the ledger accounts were compared it was found that credits exceeded debits by 

$(37,543.60 – 37,453.60) = $90. 

The initial step is to equalise the total debits and credits by posting a debit of $90 to a 

suspense account. 

When the cause of the error is discovered, the double entry to correct it should be logged in the 

journal as: 

DEBIT Sales 

$90 

CREDIT Suspense 

a/c 

 

$90

To close off suspense a/c and correct transposition error 

 

2.7 Example: error of omission 

When Guttersnipe Builders paid the monthly salary cheques to its office staff, the payment of $5,250 

was correctly entered in the cash account, but the bookkeeper omitted to debit the office salaries 

account. As a consequence, the total debit and credit balances on the ledger accounts were not equal, 

and credits exceeded debits by $5,250. 

The initial step in correcting the situation is to debit $5,250 to a suspense account in order to equalise 

the total debits and total credits. 

When the cause of the error is discovered, the double entry to correct it should be logged in the 

journal as: 

DEBIT Office 

salaries 

account 

$5,250 

CREDIT Suspense 

a/c 

 

$5,250

To close off suspense account and correct error of omission 

 

Note. Most accounting software will have controls to prevent you from posting a one-sided entry, or a 

double entry that does not balance. 

2.8 Example: error of commission 

A bookkeeper might make a mistake by entering what should be a debit entry as a credit, or vice versa. 

For example, a credit customer pays $460 of the $660 they owe to Ashdown Tree Felling Contractors, 

but Ashdown's bookkeeper debits $460 on the receivables account in the nominal ledger by mistake 

instead of crediting the payment received. 

The total debit balances in Ashdown's ledger accounts would now exceed the total credits by  

2  $460 = $920. The initial step in correcting the error would be to make a credit entry of $920 in a 

suspense account. When the cause of the error is discovered, it should be corrected as follows. 

DEBIT Suspense 

a/c 

$920 

CREDIT Trade 

receivables 

 

$920

To close off suspense account and correct error of commission 

 

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