2022 May/June · Paper 12 · Q71 markCorrection of errors and suspense accounts
2022 May/June · Paper 12 · Q81 markCorrection of errors and suspense accounts
2022 May/June · Paper 12 · Q91 markControl accounts
2022 May/June · Paper 12 · Q101 markControl accounts
2022 May/June · Paper 22 · Q1 (b)5 marksBank reconciliation
2022 May/June · Paper 22 · Q3 (a, b, c)20 marksCorrection of errors and suspense accounts
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Practice questions
Original questions written by HomiLabs in the style of the exam, with answers and mark schemes. They are not
Cambridge past paper questions and have not been reviewed by Cambridge. Try each one before opening the answer.
Q1Correction of errors and suspense accounts · Core · Paper 1 style · 1 mark
(a)[1]
Show answer
(a) A commission
The amount is posted to the wrong account of the same class (the wrong customer's account), which is an error of commission. It is not an error of principle, because both accounts are personal accounts of credit customers.
Q2Correction of errors and suspense accounts · Core · Paper 2 style · 4 marks
(a)Name the type of error in each case.(i) A payment of $260 for electricity was not recorded in the books at all.(ii) The purchase of a delivery van was debited to the motor expenses account.(iii) A credit sale of $1,470 was entered in the sales journal as $1,740 and posted from there.(iv) A cheque paid to a supplier was debited to the bank account and credited to the supplier's account.[4]
Show answer
(a) (i) omission (ii) principle (iii) original entry (iv) complete reversal
1 mark each.
Q3Correction of errors and suspense accounts · Core · Paper 2 style · 4 marks
(a)State two types of error that are not revealed by a trial balance.[2]
(b)Explain why a suspense account may be opened when a trial balance is prepared.[2]
Show answer
(a) Any two of: omission, commission, principle, original entry, complete reversal, compensating errors.
1 mark each.
(b) When the trial balance totals do not agree, the difference is entered in a suspense account so that the totals agree temporarily and the financial statements can be drafted until the errors are found and corrected.
1 mark: totals disagree/difference recorded. 1 mark: temporary account until errors are found and corrected.
Q4Correction of errors and suspense accounts · Core · Paper 2 style · 4 marks
(a)Explain what is meant by an error of principle.[2]
(b)State whether an error of principle will cause the trial balance totals to disagree. Give a reason.[2]
Show answer
(a) An amount is entered in the correct amount and on the correct side, but in the wrong class of account, e.g. capital expenditure entered in an expense account.
1 mark: wrong class/type of account. 1 mark: example, e.g. purchase of a non-current asset debited to an expense account.
(b) No. The debit and the credit entries are still equal, so the totals agree.
1 mark: no. 1 mark: reason (equal debit and credit).
Q5Correction of errors and suspense accounts · Core · Paper 2 style · 3 marks
(a)A credit purchase of $2,100 from Bilal Traders was completely omitted from the books. Prepare the journal entry to correct this error. A narrative is not required.[2]
(b)Explain why this error did not cause the trial balance totals to disagree.[1]
Show answer
(a) Dr Purchases $2,100; Cr Bilal Traders $2,100
1 mark debit, 1 mark credit.
(b) Neither the debit nor the credit was recorded, so both totals were understated by the same amount.
1 mark.
Q6Correction of errors and suspense accounts · Standard · Paper 1 style · 1 mark
(a)Which error will cause the totals of a trial balance to disagree?[1]
Show answer
(a) C discount allowed of $50 was entered in the discount allowed account but not in the customer's account
In C only one side of the double entry was made (a debit with no matching credit), so the trial balance will not agree. A (omission), B (principle) and D (commission) all have equal debits and credits, so the trial balance still agrees.
Q7Correction of errors and suspense accounts · Standard · Paper 1 style · 1 mark
(a)The purchase of an office printer costing $900 was debited to the purchases account. Depreciation is ignored. What is the effect of this error?[1]
Show answer
(a) A gross profit and profit for the year are both understated by $900
Purchases are overstated by $900, so cost of sales is $900 too high, and gross profit and therefore profit are both $900 too low. B is wrong because a lower gross profit carries through to profit. Non-current assets are understated, not overstated.
Q8Correction of errors and suspense accounts · Standard · Paper 2 style · 6 marks
(a)Prepare journal entries to correct the following errors. Narratives are not required.(i) Repairs to machinery, $640, were debited to the machinery account.(ii) A credit sale of $1,230 to Lim Hardware was entered in the books as $1,320.(iii) A payment of $500 by cheque to Patel Supplies was debited to the bank account and credited to Patel Supplies' account.[6]
Show answer
(a)(i) Dr Machinery repairs $640; Cr Machinery $640(ii) Dr Sales $90; Cr Lim Hardware $90(iii) Dr Patel Supplies $1,000; Cr Bank $1,000
2 marks per entry (1 debit, 1 credit with correct amount). (ii) difference 1,320 − 1,230 = 90. (iii) complete reversal is corrected with twice the amount: 2 × 500 = 1,000.
Q9Correction of errors and suspense accounts · Standard · Paper 2 style · 5 marks
(a)Shabnam's trial balance on 31 December had debit totals of $61,250 and credit totals of $61,650. The difference was entered in a suspense account. These errors were then found:1 The purchases journal had been undercast by $280.2 Rent paid of $1,150 had been entered in the rent account as $1,050.3 Cash sales of $490 had been credited to the sales account as $510.Prepare the suspense account, showing the opening balance and the corrections.[4]
(b)State one error that would not be corrected through the suspense account.[1]
Show answer
(a) Suspense account: Dr balance b/d $400. Cr Purchases $280, Cr Rent $100, Cr Sales $20. Totals $400 each side.
Opening balance: credits exceed debits by 61,650 − 61,250 = 400, so suspense has a debit balance of $400 (1). Purchases 280 on credit side (1). Rent 1,150 − 1,050 = 100 on credit side (1). Sales 510 − 490 = 20 on credit side (1); account closes with 280 + 100 + 20 = 400.
(b) e.g. an error of omission, commission, principle, original entry, complete reversal or compensating error (with example).
1 mark.
Q10Correction of errors and suspense accounts · Standard · Paper 2 style · 5 marks
(a)For each error state whether the profit for the year is overstated, understated or not affected, and by how much.(i) Closing inventory was undervalued by $500.(ii) Rent received of $300 was credited to the commission received account.(iii) The purchase of shop fixtures, $750, was debited to the repairs account.(iv) Wages owing of $420 at the year end were not recorded.(v) A credit sale of $600 was omitted from the books.[5]
Show answer
(a) (i) understated $500 (ii) not affected (iii) understated $750 (iv) overstated $420 (v) understated $600
1 mark each. (ii) both accounts are income accounts, so total income is unchanged. (iii) capital expenditure treated as an expense. (iv) an expense is missing.
Q11Correction of errors and suspense accounts · Standard · Paper 2 style · 5 marks
(a)Rosa's draft profit for the year ended 30 September was $31,560. The following errors were found:1 Carriage outwards of $240, paid in cash, had not been recorded.2 Discount allowed of $160 had been credited to the discount received account.3 The purchase of office equipment, $1,200, had been debited to the office expenses account.4 Closing inventory had been overstated by $700.Prepare a statement of corrected profit for the year. Depreciation is ignored.[5]
Show answer
(a) $31,500
Draft 31560 − 240 (1) − 320 (1: income overstated 160 and expense understated 160) + 1,200 (1) − 700 (1) = 31500 (1 for final figure with correct method).
Q12Correction of errors and suspense accounts · Standard · Paper 2 style · 5 marks
(a)Explain what is meant by a compensating error.[2]
(b)A credit sale of $745 to Kim was entered in the sales journal as $475 and posted from there. Prepare the journal entry to correct this error. A narrative is not required.[2]
(c)State the name of this type of error.[1]
Show answer
(a) Two or more separate errors that cancel each other out, e.g. the sales account overcast by $100 and the wages account overcast by $100.
1 mark: two errors cancelling each other. 1 mark: example or statement that the trial balance still agrees.
(b) Dr Kim $270; Cr Sales $270
745 − 475 = 270. 1 mark debit, 1 mark credit.
(c) Error of original entry
1 mark.
Q13Correction of errors and suspense accounts · Challenge · Paper 1 style · 1 mark
(a)[1]
Show answer
(a) A $22,500
Error 1: an expense (discount allowed) is overstated by $150 and income (discount received) is understated by $150, so profit is $300 too low: +300. Error 2: overstated closing inventory makes profit too high: −1,200. 23400 + 300 − 1,200 = 22500. B adjusts error 1 by only $150.
Q14Correction of errors and suspense accounts · Challenge · Paper 2 style · 8 marks
Kofi's trial balance on 31 March did not agree: the debit side totalled $86,420 and the credit side $85,950. The difference was entered in a suspense account and a draft profit for the year of $18,600 was calculated. The following errors were then found:1 The sales journal had been undercast by $300.2 Wages of $1,240 had been entered in the wages account as $1,420.3 Rent received of $250 had been entered in the bank account but omitted from the rent received account.4 Discount allowed of $85 had not been posted to the discount allowed account.5 A payment of $175 to Chen, a supplier, had been entered correctly in the cash book but not posted to Chen's account.
(a)Prepare the suspense account, starting with the balance arising from the trial balance.[4]
(b)Prepare a statement showing the corrected profit for the year.[4]
Show answer
(a) Suspense: Cr balance b/d $470. Dr Sales $300, Dr Wages $180, Dr Rent received $250. Cr Discount allowed $85, Cr Chen $175. Totals $730 each side.
Opening: debits exceed credits by 86420 − 85950 = 470, so a credit balance of 470 (1). Debit entries 300, 180 (1,420 − 1,240), 250 (1). Credit entries 85 and 175 (1). Both sides total 730.
(b) $19,245
Draft 18,600 + sales 300 (1) + wages 180 (1) + rent received 250 (1) − discount allowed 85 (1) = 19245. Error 5 affects only Chen's account and the suspense account, so there is no effect on profit.
Q15Correction of errors and suspense accounts · Challenge · Paper 2 style · 7 marks
Bilal's draft financial statements for the year ended 31 December showed a profit of $27,400 and total current assets of $18,900. The following matters had not been dealt with:1 Insurance of $360 had been paid in advance for next year.2 A trade receivable of $520 was known to be irrecoverable and should be written off.3 Closing inventory included goods that cost $900 but could only be sold for $650.4 Commission of $430 was receivable but had not been received or recorded.5 Cash drawings of $600 had been debited to the wages account.
(a)Calculate the corrected profit for the year.[4]
(b)Calculate the corrected total current assets.[3]
Show answer
(a) $28,020
27400 + 360 − 520 − 250 (900 − 650) + 430 + 600 = 28020. 1 mark for each two correct adjustments (max 3), 1 for the final figure.
(b) $18,920
18900 + 360 prepayment − 520 receivable − 250 inventory + 430 commission receivable = 18920. Item 5 does not affect current assets. 2 marks for adjustments, 1 for the final figure.
Q16Correction of errors and suspense accounts · Challenge · Paper 2 style · 8 marks
After a suspense account was opened, the following errors were found in Olena's books:1 Discount received of $230 had not been posted to the discount received account.2 The total of the sales returns journal, $410, had been posted to the credit of the sales returns account.3 A cheque for $1,500 received from Fatima, a customer, had been entered correctly in the bank account but credited to Fatima's account as $1,050.No other errors were found and correcting them closed the suspense account.
(a)Prepare the journal entries to correct these errors. Narratives are not required.[6]
(b)Calculate the balance in the suspense account before the corrections were made and state whether it was a debit or a credit balance.[2]
Show answer
(a)1 Dr Suspense $230; Cr Discount received $2302 Dr Sales returns $820; Cr Suspense $8203 Dr Suspense $450; Cr Fatima $450
2 marks each. Error 2: the amount was entered on the wrong side, so twice the amount (2 × 410 = 820) is needed. Error 3: 1,500 − 1,050 = 450.
(b) Debit balance of $140
Corrections: debits to suspense 230 + 450 = 680; credit to suspense 820. For the account to close, the opening balance must be a debit of 820 − 680 = 140 (1 amount, 1 side).
Q17Correction of errors and suspense accounts · Challenge · Paper 2 style · 7 marks
Adebayo's draft income statement showed a gross profit of $42,800 and a profit for the year of $15,900. The following errors were then found:1 Carriage inwards of $640 had been debited to the carriage outwards account.2 Goods costing $1,100 taken by Adebayo for his own use had not been recorded.3 Closing inventory had been undercast by $300.4 Wages of $850 paid to a sales assistant had been debited to the purchases account.
(a)Calculate the corrected gross profit.[4]
(b)Calculate the corrected profit for the year.[3]
15900 + 1,100 + 300 = 17300. Errors 1 and 4 only move costs between cost of sales and expenses, so profit is unchanged (1 for this explanation, 1 each for the two adjustments).
Q18Bank reconciliation · Core · Paper 2 style · 3 marks
(a)State two reasons why the balance in the cash book may differ from the balance on the bank statement on the same date.[2]
(b)Explain what is meant by an unpresented cheque.[1]
Show answer
(a) Any two, e.g. unpresented cheques; amounts paid in but not yet credited; bank charges or interest not yet entered in the cash book; standing orders or direct debits not yet recorded; credit transfers not yet recorded; dishonoured cheques; errors.
1 mark each.
(b) A cheque that has been written and entered in the cash book but has not yet been paid by the bank (not yet on the bank statement).
1 mark.
Q19Bank reconciliation · Core · Paper 2 style · 4 marks
(a)On 31 August the bank column of Yasmin's cash book showed a debit balance of $3,870. Her bank statement showed these items that were not in the cash book:• bank charges, $45• direct debit for insurance, $220• credit transfer received from a customer, $680• a cheque for $350 received from Ahmed had been dishonouredState which of these items should be entered on the debit side of the cash book.[1]
(b)Calculate the updated cash book balance on 31 August.[3]
Show answer
(a) Only the credit transfer of $680.
1 mark.
(b) $3,935 debit
3,870 + 680 − 45 − 220 − 350 = 3935. 1 mark for adding 680, 1 for deducting the three payments, 1 for the final figure.
Q20Bank reconciliation · Standard · Paper 1 style · 1 mark
(a)[1]
Show answer
(a) A $2,500
Unpresented cheques have not yet left the bank account, so the bank balance is higher: +610. The deposit is not yet on the statement, so the bank balance is lower: −450. 2340 + 610 − 450 = 2500. B reverses both adjustments.
Q21Bank reconciliation · Standard · Paper 2 style · 5 marks
(a)After updating, the cash book of Hassan Electricals showed a debit balance of $5,612 on 30 June. The bank statement balance on the same date was $6,327. The difference was caused by:• cheques paid to suppliers but not yet presented: $1,380 and $455• cash paid in on 30 June but not yet credited by the bank: $1,120Prepare a bank reconciliation statement on 30 June, starting with the balance on the bank statement.[4]
(b)Name one item that would be entered in the cash book when it is updated but would not appear in the bank reconciliation statement.[1]
Show answer
(a) Balance per bank statement $6,327; add amount not credited $1,120; less unpresented cheques $1,835; balance per cash book $5,612.
(b) e.g. bank charges, a standing order, a direct debit, a credit transfer, interest or a dishonoured cheque.
1 mark.
Q22Bank reconciliation · Challenge · Paper 2 style · 7 marks
On 31 October the bank column of Soo-jin's cash book showed an overdraft of $1,460. Comparison with the bank statement showed:1 A standing order of $300 for rent had been paid by the bank but not entered in the cash book.2 Bank interest of $85 had been charged.3 A customer had paid $540 by credit transfer.4 A cheque for $910 sent to a supplier had not been presented.5 Takings of $1,275 paid in on 31 October had not been credited by the bank.
(a)Calculate the updated cash book balance on 31 October. State whether it is a debit or a credit balance.[3]
(b)Calculate the balance shown on the bank statement on 31 October, stating whether it is an overdraft.[3]
(c)State where the updated cash book balance will appear in the statement of financial position.[1]
Show answer
(a) $1,305 credit (overdraft)
−1,460 − 300 − 85 + 540 = -1305 (2 marks for adjustments), so an overdraft of 1305, a credit balance (1).
(b) Overdraft of $1,670
-1305 + 910 unpresented (1) − 1,275 not credited (1) = -1670, an overdraft of 1670 (1).
(c) Under current liabilities (bank overdraft).
1 mark.
Q23Bank reconciliation · Challenge · Paper 2 style · 6 marks
On 31 May the bank statement of Dario's shop showed a balance of $8,140 in his favour. The following information is available:• cheques of $2,350 entered in the cash book had not been presented• a deposit of $1,600 had not been credited by the bank• bank charges of $60 had not been entered in the cash book• rent of $450 from a tenant had been received by credit transfer but not entered in the cash book
(a)Calculate the updated cash book balance on 31 May.[2]
(b)Calculate the balance shown in the cash book before it was updated.[2]
(c)State two benefits to Dario of preparing a bank reconciliation statement regularly.[2]
Show answer
(a) $7,390
8140 − 2,350 + 1,600 = 7390.
(b) $7,000
Updated balance = original − 60 + 450, so original = 7390 + 60 − 450 = 7000.
(c) Any two, e.g. errors in the cash book or by the bank are found quickly; fraud is more likely to be detected; it shows which cheques are still unpresented or dishonoured; the cash book balance is brought up to date for the financial statements.
1 mark each. Do not accept vague answers such as 'finds errors' without saying where.
Q24Control accounts · Core · Paper 1 style · 1 mark
(a)Which item is entered on the credit side of a sales ledger control account?[1]
Show answer
(a) B cheques received from credit customers
Money received from credit customers reduces the amount they owe, so it is credited. Credit sales, dishonoured cheques and the opening debit balance all increase the amount owed and are debited.
Q25Control accounts · Core · Paper 2 style · 4 marks
(a)State two benefits of keeping control accounts.[2]
(b)State the source of information for (i) credit sales and (ii) discount allowed in a sales ledger control account.[2]
Show answer
(a) Any two, e.g. they check the arithmetical accuracy of the sales or purchases ledger; they help locate errors in a particular ledger; they give a quick total of trade receivables or payables; they help prevent fraud because the control account can be kept by a different person.
1 mark each.
(b) (i) sales journal (ii) discount allowed column of the cash book
1 mark each.
Q26Control accounts · Standard · Paper 2 style · 5 marks
(a)Prepare the sales ledger control account of Mirza Wholesale for March from the following information.Balance owed by customers on 1 March $14,620Credit sales $38,450Sales returns $1,270Cheques received from customers $35,900Discount allowed $640Irrecoverable debts written off $410Customer's cheque dishonoured $300Balance the account on 31 March and bring down the balance on 1 April.[5]
Show answer
(a) Debit side: balance b/d 14,620, sales 38,450, bank (dishonoured cheque) 300 = 53,370. Credit side: sales returns 1,270, bank 35,900, discount allowed 640, irrecoverable debts 410, balance c/d 15,150. Balance b/d on 1 April $15,150 debit.
1 mark for the debit entries, 1 for returns and bank, 1 for discount and irrecoverable debts, 1 for balance c/d 15,150, 1 for balance b/d on the debit side.
Q27Control accounts · Standard · Paper 2 style · 6 marks
(a)The following information relates to the purchases ledger of Kaur Fabrics for April.Balance owed to suppliers on 1 April $9,840Credit purchases $27,300Payments to suppliers $25,150Discount received $520Purchases returns $860Amount set off against the sales ledger (contra) $700Calculate the balance on the purchases ledger control account on 30 April and state whether it is a debit or a credit balance.[4]
(b)Explain what is meant by a contra entry (set-off) between the control accounts.[2]
(b) When a business both buys from and sells to the same firm, the amount the firm owes is set off against the amount owed to it, so only the net amount is paid. It is debited in the purchases ledger control account and credited in the sales ledger control account.
1 mark: same person is both customer and supplier and balances are set off. 1 mark: correct entries (Dr PLCA, Cr SLCA).
Q28Control accounts · Challenge · Paper 2 style · 8 marks
Yuki does not record credit sales in a sales journal. For the year ended 31 December she has the following information:Trade receivables 1 January $12,300Trade receivables 31 December $13,850Cash and cheques received from credit customers $61,200Discount allowed $1,150Irrecoverable debts written off $600Sales returns $2,050
(a)Calculate Yuki's credit sales for the year.[4]
(b)The total of the balances in Yuki's sales ledger on 31 December was $13,530. Suggest two reasons why this total differs from the control account balance.[2]
(c)Explain how a sales ledger control account helps the owner to locate errors.[2]
Show answer
(a) $66,550
Credit sales = closing 13,850 + receipts 61,200 + discount 1,150 + irrecoverable debts 600 + returns 2,050 − opening 12,300 = 66550. 3 marks for correct use of the items, 1 for the answer.
(b) Any two, e.g. a customer's balance has been omitted from the list; an item was posted to the control account but not to a customer's account (or the reverse); a customer's account was miscast; an item was posted to the wrong side of a customer's account.
1 mark each.
(c) If the control account balance agrees with the total of the sales ledger balances, the ledger is probably arithmetically correct; if not, the error is in the sales ledger, so the search is limited to that ledger.
1 mark: comparison of control balance with list of balances. 1 mark: narrows the search to one ledger.
Q29Trial balance · Core · Paper 1 style · 1 mark
(a)Which balance appears on the credit side of a trial balance?[1]
Show answer
(a) B trade payables
Trade payables are a liability and have a credit balance. Drawings, carriage inwards (an expense) and trade receivables (an asset) have debit balances.
Q30Trial balance · Challenge · Paper 2 style · 6 marks
(a)The following balances were taken from the books of Aryan Traders on 31 December.Premises $60,000Equipment $14,500Inventory 1 January $8,200Purchases $41,300Revenue (sales) $72,900Wages $15,600Rent received $3,600General expenses $4,450Trade receivables $6,900Trade payables $5,750Bank overdraft $1,850Loan (repayable 2032) $20,000Drawings $9,000Capital ?Calculate the debit total of the trial balance and the capital balance that makes the trial balance agree.[4]
(b)State two limitations of a trial balance.[2]
Show answer
(a) Debit total $159,950; capital $55,850 (credit)
Debits: premises, equipment, inventory, purchases, wages, general expenses, receivables, drawings = 159950 (2, 1 for correct classification). Credits without capital = 72,900 + 3,600 + 5,750 + 1,850 + 20,000 = 104100 (1). Capital = 159950 − 104100 = 55850 (1).
(b) Any two: it does not reveal errors of omission, commission, principle, original entry, complete reversal or compensating errors; it only proves arithmetical accuracy of the double entry; it does not show profit.
1 mark each.
Similar questions
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References only: find each question in its paper (official link where available, otherwise through your school).
Correction of errors and suspense accountsBanker31 questions · 9/9 sessions
