Worked example 1
A bookkeeper extracts a trial balance and finds the debit total is $51,250, while the credit total is $51,000. A suspense account is opened. It is later found that a payment of $250 to a supplier was correctly credited to the bank account but was not debited to the supplier's account (trade payables). Explain the imbalance and show the correction.
Show solution outline
1. Identify the Imbalance: The debit side is higher than the credit side by 51,000 = $250. This is incorrect. The problem states a debit was omitted, which means the debit side should be lower. Let's re-read the error. A payment to a supplier (creditor) was not debited to their account. A creditor's account normally has a credit balance. A payment reduces this liability, so it should be debited. The bank account was correctly credited. So, a debit entry was omitted.
2. Initial Suspense Entry: The trial balance would have appeared as: Debits $51,000, Credits $51,250. The debit side is lower by $250. To balance it, a debit of $250 is placed in the suspense account.
3. Correction Journal Entry: The error was an omitted debit to the Trade Payables account. To correct this, we must make that debit entry. The corresponding credit will be to the suspense account to clear the difference it was holding.
- Debit (DR): Trade Payables Account $250 (To record the payment and reduce the liability)
- Credit (CR): Suspense Account $250 (To close the suspense account related to this error)
4. Suspense Account Ledger:
- The account had an opening debit balance of
- The correction journal credits the account with
- The final balance is now $0, indicating the error has been corrected.