Correct errors in the Trial balance by means of journal entries and adjust the trial balance

These errors are also called unilateral errors because they affect only one side of the double entry. They cause the trial balance totals to differ.

Common Types

1. Single entry – only one part of a transaction is recorded (debit without credit or credit without debit)

2. Wrong amounts – different amounts are entered on debit and credit sides

3. Same side entries – a transaction is entered on the same side of both accounts (both debits or both credits)

4. Balancing errors – mistakes when adding up account balances or calculating account balances

5. Wrong placement – a debit balance is placed on the credit side of the trial balance or vice versa

A suspense account is a temporary account used to make the trial balance agree temporarily. When the debit side total is smaller, a suspense account with a debit balance is added to the debit side. When the credit side total is smaller, a suspense account with a credit balance is added to the credit side.

Example: If debit total is TZS 9,750,000 and credit total is TZS 10,200,000, the difference of TZS 450,000 is placed as a debit balance in the suspense account on the debit side to make both sides equal.

When errors are corrected, the corresponding entries are made to the suspense account. After all corrections, the suspense account balance should become zero.

1. Identify the error – determine what went wrong and what the correct entry should have been

2. Prepare a correcting journal entry – make a journal entry that reverses the wrong entry and records the correct entry

3. Post to the suspense account – when the error affects trial balance agreement, the corresponding entry is made to the suspense account

4. Prepare the corrected trial balance – after posting all corrections, extract a new trial balance with updated balances

The trial balance of Mkude Traders for the year ended 31st December 2020 showed a difference of TZS 1,280,000 (credit side exceeds debit side). The difference was placed in the suspense account. The following errors were later discovered:

(i) Purchases account was undercast by TZS 4,500,000
(ii) Insurance expense account was undercast by TZS 640,000
(iii) Cash received from a debtor TZS 800,000 was entered in cash account only
(iv) A credit purchase of TZS 9,440,000 was entered as TZS 4,940,000

Required:

(a) Show journal entries to correct the errors
(b) Prepare the suspense account

Solution

(a) Journal Entries

(b) Suspense Account

After correcting all errors, the suspense account still has a balance of TZS 5,620,000, meaning more errors may still need to be discovered.

After posting all correcting entries to the relevant ledger accounts, a new trial balance is prepared using the updated balances. This is called a corrected trial balance. It shows the correct balances of all accounts after all errors have been fixed.

The corrected trial balance serves as the basis for preparing accurate financial statements (income statement and statement of financial position).

• The suspense account is a temporary account used only while correcting errors
• Every correcting journal entry follows the double entry principle
• After all corrections, the suspense account balance should be zero
• A corrected trial balance proves that all errors affecting the trial balance have been fixed

In Tanzania, small shop owners like those at Buguruni or Kariakoo markets keep records of their daily sales and purchases. If their records do not balance, they cannot know their true profit or loss. Using suspense accounts and correcting entries helps them identify mistakes—such as recording a purchase twice or forgetting to record money received from a customer—and ensures their business records show the correct picture for making decisions about restocking or saving profits.