ZIMSEC O Level Principles of Accounts Notes: An example of how to correct errors in a suspense account

  • We have already looked at the suspense account and why it is needed
  • We will now look at an example

You have extracted a trial balance and drawn up accounts for the year ended 31 December 20X7. There was a shortage of $78 on the credit side of the trial balance, a suspense account being opened for that amount.
During 20X8 the following errors made in 20X7 were found:

  1. $125 received from sales of old office equipment has been entered in the sales account
  2. Purchases day book had been overcast by $10
  3. A private purchase of $140 had been included in the business purchases
  4. Bank charges $22 entered in the cash book have not been posted to the bank charges account
  5. A sale of goods to K Ramba $230 was correctly entered in the sales book but entered in the personal account as $320


  1.  Show the requisite journal entries to correct the errors
  2. Write up the suspense account showing the correction of the errors
  3. The net profit originally calculated for 20X7 was $28,400. Show your calculation of the correct figure


a) The Journal Entries

1 JanuarySales Account125
Disposal Account125
1 JanuaryDisposal Account125
Profit and Loss Account125
1 JanuarySuspense Account10
Purchases Account10
1 JanuaryDrawings Account140
Purchases Account140
1 JanuaryBank Charges Account22
Suspense Account22
1 JanuarySuspense90
K Ramba90
  • You will notice the disposal account and profit and loss entries. These were not required but were meant to show that disposal occurred
  • We are assuming depreciation on the disposable assets is zero the question was not clear on this point

b) The suspense account:

General Ledger
Suspense Account
1 JanuaryPurchases101 JanuaryBalance b/d78
1 JanuaryK Ramba901 JanuaryBank Charges Account22



c) Profit calculation:

Profit on 1 January28,400
Overstated Sales(125)
Assumed Profit on disposal125
Overstated Purchases10
Overstated Purchases140
Bank Charges(22)
Revised Profit


  • Negative amounts that reduce profit are in brackets
  • A profit of $125 is assumed on disposal
  • Private purchases made using the business’s money are treated as Drawings which are not included in profit calculations but appear as a separate item in the Statement of Financial position

To access more topics go to the Principles of Accounts Notes.