- 20 Marks
Question
a) When there is a difference in a trial balance, a suspense account is opened with the amount of the difference so that the trial balance agrees (pending the discovery and correction of the errors causing the difference). This is the only time an entry is made in the records without a corresponding entry elsewhere. Not all types of errors affect the balancing of the records and the suspense account.
Required:
Identify and explain THREE errors that do not affect the suspense account. (6 marks)
b) The Bank Account in the books of Akwatia Ltd for the month of October 2017 was as follows:
The following is the bank statement for Akwatia Ltd for the month of October 2017
The bank has confirmed to Akwatia Ltd that it made errors in Akwatia’s bank account on 6 October 2017 and 21 October 2017 amounting to GH¢950 and GH¢600, respectively.
Required:
Prepare the bank reconciliation statement for Akwatia Ltd as at 31 October 2017. (14 marks)
Answer
a) Errors that do not affect the suspense account:
- Error of Omission: A transaction is not recorded at all.
- Error of Commission: An item is entered to the correct side of the wrong account.
- Error of Principle: An item is posted to the correct side of the wrong type of account, such as cash paid for plant repairs (expense) debited to the plant account (asset).
- Error of Original Entry: An incorrect figure is entered in the records and then posted to the correct account. Example: Cash GH¢1,000 for plant repairs is entered as GH¢100; plant repairs account is debited with GH¢100.
- Reversal of Entries: The correct amount and accounts are used, but the debit is credited, and the credit is debited.
b) Reconcile the opening balance in the bank account with the opening balance on the bank statements:
- Tags: Bank Reconciliation, Errors in accounting, Suspense account
- Level: Level 1
- Topic: Bank reconciliations, Correction of errors
- Series: MAY 2018
- Uploader: Theophilus