Account 6 Marks Question

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Keeping in view their nature, errors can be classified into following four categories:

1. Errors of Omission.
2. Errors of Commission.
3. Errors of Principle.
4. Compensating Errors.

Errors not affecting the Trial Balance or Two-sided Errors are those errors which do not affect the agreement of Trial Balance. Such errors are not disclosed by the Trial Balance. Following are the examples of such errors:

1. Errors of Principle, i.e., errors which arise due to incorrect application of principles of accounting. Suppose on purchase of a typewriter or printer, Office Expenses Account is debited, Trial Balance will still match.
2. Compensating Errors: If the effect of one error is cancelled by the effect of some other error or errors, Trial Balance will still match. Suppose, an amount of ₹ 10 received from A is not credited to his account and the total of the Sales Book is ₹ 10 in excess, the omission of credit to A's Account will be made up by the increased credit to the Sales Account; the Trial Balance will still match.
3. Errors of complete omission.
4. Posting correct amount on the correct side but in wrong account.
5. Recording wrong amount in the books of original entry (but the recorded amount is correctly debited and credited).
6. Recording both aspects of a transaction twice in the books of account.

Solution is as follows:

1. The following are the causes that make a Trial Balance incorrect.

1. Incomplete posting of Journal Entry.
2. Posting in the wrong side of Account.
3. Wrong totalling of Subsidiary Books.
4. Wrong balance of Account.
5. Omission of total of Subsidiary book into Account.
6. Wrong totalling of the Trial Balance.

2.  

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Solution is as follows:

Solution is as follows.

Suspense Account: Suspense Account is the account to which the amount being the difference in trial balance is temporarily placed. If the total of debit side is short, Suspense Account will show debit balance. And if, the total of credit side is short, Suspense Account will show credit balance. The difference is placed in the Suspense Account so that final accounts are prepared without delay. As a result of this, Trial Balance will appear to agree.. However, the errors still remain in the Trial Balance which are identified and rectified.
Suspense Account is used for rectifying all One-Sided Errors: It is opened Due to errors any error in journal entries especially one-sided errors, There may be cases when Trial balance does not match i.e when the total of the debit column does not match that of the credit column, then the difference of the Trial Balance is transferred to a temporary account in order to avoid delay in preparation of the financial statements. This temporary account is termed as Suspense Account and it is prepared only in case of one-sided errors in the books of accounts.