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In the statement of financial position, the balance of a suspense account will be shown
either as liabilities or assets, depending on whether it has a credit or debit balance,
respectively. The journal entries for the correction of accounting errors involving a
suspense account can be presented as follows:

(a) Debit the account that should have been debited (but was not) and credit the suspense
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account (which has been temporarily debited).
(b) Debit the suspense account (which has been temporarily credited) and credit the
account that should have been credited (but was not).
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Example 9.4
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During the preparation of the trial balance for Mtata & Family Company on December
31 2021, a discrepancy of TZS 391,000 on the debit side was identified. Upon further
st
investigation, the following errors were discovered:
March 1: An amount of TZS 150,000, which should have been recorded as
carriage inwards, was erroneously posted to carriage outwards.

June 5: An invoice of TZS 89,000 received from a creditor was correctly
entered in the purchase’s day book, but was incorrectly posted as TZS
98,000 to the creditor’s account.
August 7: The sales were overstated by TZS 150,000.
November 5: Cash purchases of TZS 232,000 were only recorded in the cash book
and not posted elsewhere.
Required:

(a) Prepare journal entries to correct the aforementioned errors.
(b) Balance the suspense account after the corrections have been made.

Student’s Book Form Five
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