W9 - CORRECTION OF ERRORS - ERRORS, SUSPENSE ACCOUNT &...

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1 ERRORS, SUSPENSE ACCOUNT & INCOMPLETE RECORD
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2 ERRORS
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3 TYPES OF ERRORS THAT CAUSE A TRIAL BALANCE TO DISAGREE 1. Arithmetic errors – the incorrect calculation of the total and/or balance of an account. 2. Posting errors – an entry: (a) omitted from one side; (b) entered twice on the same side; (c) wrong amount on one side (eg. transposed figures). 3. Extraction errors in preparing the trial balance.
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4 TYPES OF ERRORS WHICH DO NOT CAUSE A TRIAL BALANCE TO DISAGREE 1. Error of principle – one entry in the wrong class/type of account. 2. Error of commission – one entry in the correct class/type, but the wrong account. 3. Error of omission – transaction omitted from the books.
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5 4. Error of prime/original entry – wrong amount in a book of prime entry and thus on both sides of the ledger. 5. Compensating error – two unrelated arithmetic or posting errors of the same amount. 6. Double posting error – (a) wrong amount on both sides; (b) correct amount on the wrong side of both accounts.
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6 SUSPENSE ACCOUNT
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7 PURPOSES OF SUSPENSE ACCOUNTS Recording undefined transactions. To record in the ledger any difference on a trial balance and thus make it agree. The entry in the suspense account must be on the same side of the ledger as the entry in the trial balance. The error(s) are located later and corrected through the suspense account. Only errors that would cause a trial balance to disagree are corrected through the suspense account.
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8 PROCEDURE FOR DEALING WITH THE CORRECTION OF ERRORS 1. Consider the existing entries. 2. Consider the correct entries.
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W9 - CORRECTION OF ERRORS - ERRORS, SUSPENSE ACCOUNT &...

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