Extended Trial Balance

What is a suspense account?

A temporary account used to hold unallocated or unknown entries until the correct account is identified.

When should you open a suspense account?

When the equal and opposite entry is unknown OR when debits don’t equal credits in the trial balance

What is the effect of a suspense account on the trial balance?

It restores balance temporarily until errors are corrected.

How do you record an unknown receipt of £495

Debit : Bank

Credit : suspense

If credits exceed debits by £140 what entry is made?

Debit : suspense £140

If debits exceed credits by £140, what entry is made?

Credit: suspense £140

How is a suspense account treated in financial statements if unresolved?

As a current asset or liability, or as a drawing/ capital introduced.

Name 4 errors that cause imbalance in a trial balance

1) two debits or two credits instead of one of each.

2) different amounts posted

3) omission of one leg

4) duplication of one leg

What does a trial balance difference divisible by 9 indicate?

A transposition error

If a debit column exceeds the credit column, what should you check?

Look for duplicate debit entries or missing credit entries.

What are the steps to correct an error using suspense ?

1) open suspense account

2) identify actual entries

3) identify correct entries

4) post correcting entries

Drawings £1,000 omitted- what is the correction?

Debit: drawings £1,000

Credit : suspense £1,000

Name 5 errors that don’t cause imbalances?

Omission, duplication, original entry error, reversal, commission

What is an error of commission?

Post to the wrong account of the same class. (Putting in the rent account instead of motor).

Journal entry for £1,000 closing stock

Dr: Stock (balance sheet)

Cr: closing stock (p+l)

Journal entry for depreciation of £200

Dr: depreciation expense £200

Cr: accumulated depreciation £200

Journal entry for accrual £150 electricity.

Dr: electricity £150

Cr: accruals £150

Journal entry for prepayment £165 insurance

Dr: prepayments

Cr: Motor Expenses

Journal entry for provision for doubtful debts

Dr: bad debt expense

Cr: provision for doubtful debts

What is an ETB?

A trial balance extended to include adjustments before preparing financial accounts.

What are the 5 stages of preparing an ETB?

1) extract initial trial balance

2) record adjustment in journal

3) post to extended trial balance

4) calculate adjusted trial balance

5) prepare accounts

What columns does an ETB include?

Initial tb (dr and cr)

Adjustments (dr and cr)

Adjusted tb (dr/cr)

When can VAT relief on bad debts be claimed

After 6 months from supply or due date, and debt is written off

Name the 2 methods of presenting depreciation

1) net book value approach

2) cost and provision approach