SUSPENSE ACCOUNT
If
the difference in the trial balance is not quickly located, it is usual to put
the difference to suspense account in order to make the trial balance balanced.
• If the debit side is short, the suspense account will be
debited saying “To differences in trial balance” and
• Similarly, the suspense account will be credited if the
credit side is short.
• The difference in the trial balance is due to type of
mistakes which affect only one account such as wrong posting of an account,
mistake in totalling a subsidiary book etc. Such types of mistakes are only
reflected in suspense account.
When the difference in trial balance is put to suspense
account the account to be corrected will be debited or credited as the case may
be and the journal entry will be completed by crediting or debiting the
suspense account. When all the mistakes have been corrected, the suspense
account will show no balance.
CORRECTION IN THE NEXT
TRADING PERIOD:-- Since it is necessary to ascertain the profit or loss of
each period separately, it would be necessary to rectify errors in such a way
as not to affect the current year's expenses, losses or incomes. To take an
example, if an error committed in 2001-2002 is rectified in 2002-2003 by
debiting purchase account, it would mean that it would be treated as
expenditure for 2002-2003. This would be wrong and (proper way is to leave the
purchase account and all other nominal account for 2002-2003 unaffected by cm n
2001-2002.
For
this purpose, a separate account, profit and loss adjustment account, should be
opened and all debit and credit in respect of nominal accounts for errors
committed in previous trading period should be passed through that account. The
balance of this account is finally transferred to the capital account.
Distinction
between Error of Principal and Error of Omission
#SUSPENSEACCOUNT
|
Errors of Principal |
Errors of Omission |
|
• This error does not affect Trial Balance, • This error is due to wrong classification of Capital and Revenue
expenditure or personal and nominal account • This is not a clerical error. • This error affects profit of the business. • This error will affect value of asset or liability |
• This error may affect Trial Balance • This error is due to complete omission of a transaction or partial
omission • This is a error may or may not affect profit of the business. • This error may or may not affect value of assets or liability |
.png)
.png)
.png)
.png)
.png)
.png)
Top Reviews
Introduction to Statistics for CA Foundation
Introduction to Statistics for CA Foundation Business Mathematics, Logical Reasoning and Statistics is designed as per latest CA Foundation syllabus for Paper 3 to provide a firm grounding in the principles, techniques and practice. The book adopts self-study approach and has been written in student-friendly manner. With a blend of conceptual learning and problem-solving approach, it offers in-depth understanding of the basic mathematical and statistical tools. #introductiontostatistics
.jpg)
Chapter X of Companies Act 2013
Chapter X of Companies Act 2013 The company shall place the matter relating to such appointment for ratification by members at every annual general meeting. ... Under the Act, the provisions for rotation of auditors in the listed Company & certain other class of Companies, have been provided for. #chapterxofcompaniesact2013
.jpg)
Relevant sections under the Companies Act, 2013 dealing with fraud and false statements
Relevant sections under the Companies Act, 2013 dealing with fraud and false statements The new parent corporate law “The Companies Act 2013” is mostly ... I am limiting my write-up to the provisions to the Act, and I request the readers to refer relevant rules, if any, before ... in the 2013 Act is the Section 447 dealing with “Punishment for fraud”. ... Section 448
.jpg)
What is Corporate Image
What is Corporate Image A corporate identity or corporate image is the manner in which a corporation, firm or business enterprise presents itself to the public. The corporate identity is typically visualized by branding and with the use of trademarks, but it can also include things like product design, advertising, public relations etc #WhatisCorporateImage
.jpg)
What is Energy Audit
What is Energy Audit An energy audit is an inspection survey and an analysis of energy flows for energy conservation in a building. It may include a process or system to reduce the amount of energy input into the system without negatively affecting the output. #whatisenergyaudit
