AC120 lecture 36

1. AC120 lecture 36 • Errors in books of account • Correction of errors • Use of suspense accounts • Source: Thomas, chapter 18

2. Errors • The trial balance assists in checking the accuracy of the ledger BUT • There may still be errors in the ledger that do not cause the trial balance to disagree (refer to lecture notes on the trial balance) • If and when the errors are discovered, correcting entries are reflected firstly as journal entries and then in the general ledger

3. Examples of errors • Plant acquired at cost of €5,000 credited to the cash book but debited to the purchases account in error • Purchase invoice received from A. Creditor for €1,000 has been entered in the purchases account as €100 • Wages paid €40 not posted to the wages account and the purchases account overcast by €40 • Rent received of €400 entered in both the cash book and the ledger as rent paid • Writing narratives - informative but concise - refer to Thomas, page 204