Quick questions on Correction of errors and suspense accounts explained: H2 Principles of Accounting

All corrections are recorded first in the general journal, with a narrative explaining the correction, then posted to the ledger. The logic is always: work out what was recorded, what should have been recorded, and the entry that bridges the gap.

Errors split by whether they affected the trial-balance agreement:

When a trial balance does not agree, the difference is posted to a suspense account so that the financial statements can be drafted in the meantime. As each error that caused the imbalance is found, a journal entry corrects the real account and clears the matching amount from the suspense account. When all such errors are found, the suspense account balance becomes zero. If it does not clear, errors remain undiscovered.

Only errors touching income or expense accounts change profit. To restate profit, start from the reported figure and adjust each correction by its effect: an increase in an expense or a decrease in income reduces profit; a decrease in an expense or an increase in income raises it. Errors between two balance-sheet accounts (for example a wrong receivable account) do not affect profit at all.

State the journal entry to correct sales that were overcast (overadded) by \400$, given the difference is in a suspense account. [3 marks]

A \1\,000$ machine purchase was debited to purchases. State the correcting entry and its effect on profit. [3 marks]

Reported profit is \60\,000$. A$\$3\,000$ rent expense was omitted. State the corrected profit.