Trial balance before year (period) end adjustment
Year-end (End of period) adjustment made and ledger accounts
closed –
Ø
Assets Adjustment
o
Closing inventory
o
Depreciation
o
Irrecoverable debts and allowance for
receivables
Ø
Accruals and Deferrals
o
Accrued revenue – earned but not yet invoiced
o
Accrued expenses- incurred but not yet billed
o
Deferred income – unearned income
o
Deferred expenses – prepaid expenses
Trial balance after year end adjustment used for preparation
of financial statements
Errors revealed by trial balance
Ø
In subsidiary book
o
Error in total
Ø
In ledger:
o
Omission of one entry
o
Posting of wrong side of ledger for one entry
o
Error in amount for one entry
o
Error in balance
Ø
In trial balance
o
Error in amount
o
Omission of a balance
Errors not revealed by trial balance
Ø
Error of omission – transaction not recorded
Ø
Error of commission – transaction recorded to
wrong account of same class
Ø
Error of principle – transaction recorded to
wrong class of account
Ø
Error of original entry – correct account with
wrong amount in double entry
Ø
Reversal of entry – inverse recording
Ø
Compensating error – error in debit side is
off-set by error in credit side
Ø
Error of duplication – recording transaction
twice
Suspense account: A suspense
account is a temporary resting place for an entry that will end up somewhere
else once its final destination is determined. There are two reasons why a
suspense account could be opened:
- a bookkeeper is unsure where to post an item and enters it to a suspense account pending instructions
- there is a difference in a trial balance and 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
ACCA Article: Suspense Account and Error Correction
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