Question
The bookkeeper of Pemberton Retail extracted the following trial balance at December 31, 2025. It did not balance, and the difference was posted to a Suspense account.
| Account | Dr | Cr |
|---|
| Cash | 14,230 | |
| Accounts Receivable | 22,650 | |
| Inventory (January 1) | 18,000 | |
| Purchases | 96,500 | |
| Discount Allowed | 1,850 | |
| Utilities Expense | 1,440 | |
| Equipment | 30,000 | |
| Rent Expense | 4,800 | |
| Salaries and Wages Expense | 12,400 | |
| Sales Revenue | | 158,300 |
| Accumulated Depreciation - Equipment | | 6,000 |
| Accounts Payable | | 19,870 |
| Share Capital - Ordinary | | 15,000 |
| Retained Earnings | | 2,420 |
| Suspense | | 280 |
| Totals | 201,870 | 201,870 |
An investigation found the following errors:
- A purchase of goods on credit for $5,400 was correctly credited to Accounts Payable but posted to Purchases as $4,500.
- A discount of $350 received from a supplier was posted to the debit of Discount Allowed. No entry was made in a Discount Received account. (The supplier's account was settled correctly.)
- A credit note for sales returns of $620 was completely omitted from the books.
- A cash payment for utilities of $480 was posted to Utilities Expense twice (the credit to Cash was made once, correctly).
Required: Prepare the corrected trial balance at December 31, 2025. After the corrections the Suspense account is fully cleared — do not include it.
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 8 — Accounting Policies, Changes in Accounting Estimates and Errors
A prior-period error is corrected retrospectively: restate the comparatives and adjust the opening balance of retained earnings, rather than running the correction through the current year's profit. Establish first whether the error is prior-period or current-period, because that decides everything that follows.
Common mistakes
- Putting a prior-period correction through current profit or loss instead of opening retained earnings.
- Correcting only one side of a two-sided error, or correcting an error that has already counterbalanced itself.
- Confusing an error with a change in estimate — estimates are adjusted prospectively and are never restated.
Further readingIAS 8: policies vs estimates vs errors