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Rectifications of errors

Others 375 views 1 replies
receipt of Rs. 200 from customer is passed through bank column of cash book as a payment. Will suspense acc be affected due to this error?answer is no.. but why?
Replies (1)
Hi! Sheshadri Srinivas,

Basically,
1. Errors which affect one account, affect the agreement of the trial balance.
2. Therefore, to avoid delay in preparation of final accounts, the difference in trial balance in placed in an account named as "Suspense Account".
3. Thus, Suspense account is prepared in case of errors affecting trial balance, in others words, making it disagree or affecting only one account.

In your example, the receipt of Rs. 200 from a customer, when entered as a payment will affect two accounts 1. The Cash account 2. The customer's a/c.
The wrong journal entry made would be:
Customer's a/c (debtor) dr.
To bank a/c
Thus, increasing and decreasing the dr. side by equal amounts and thus not affecting trial balance.

Thus, No suspense a/c will be prepared.

Note: Its rectification would be made by passing the following journal entry in books of accounts:

Bank a/c dr.
To customers a/c
(Here, the amount would be 2x200= Rs. 400.)


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