Correction of Errors - Suspense Accounts (Leaving Cert Accounting): Flashcards

What is a suspense account?

Temporary account used when trial balance doesn't balance due to errors

Six error types NOT revealed by trial balance

1. Original entry 2. Omission 3. Commission 4. Principle 5. Compensating 6. Complete reversal

Error of original entry

Incorrect amount entered consistently on both debit and credit sides

Error of omission

Complete transaction left out of books entirely

Error of commission

Correct amount to correct side but wrong account

Error of principle

Correct amount to correct side but wrong type of account

Compensating error

Two errors cancel each other out

Complete reversal of errors

Correct amounts to correct accounts but on wrong sides

Capital introduced - journal entry side

Credit (owner uses personal funds for business expenses)

Drawings - journal entry side

Debit (owner uses business funds for personal items)