Cambridge 9706, Paper 1 & 2. 1,558 questions, 2020 to 2026.
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Correcting errors with journal entries, suspense accounts, and the effect of corrections on profit and the statement of financial position.
67 past paper questions on this topic since 2020, across 13 exam sessions.
| Year | Paper 1 | Paper 2 | Total | Chart |
|---|---|---|---|---|
| 2026 | 9 | 3 | 12 | |
| 2025 | 12 | 4 | 16 | |
| 2024 | 9 | 1 | 10 | |
| 2023 | 10 | 1 | 11 | |
| 2022 | 7 | 2 | 9 | |
| 2021 | 2 | 0 | 2 | |
| 2020 | 5 | 2 | 7 |
The whole topic on one page, with answers and mark schemes. Printing this page prints just this list.
A business prepared a trial balance which included a suspense account. The following matters were then identified.
After the appropriate corrections were made, the trial balance totals agreed. What was the trial balance difference used to open the suspense account?
BCorrect answer
An inexperienced bookkeeper made entries for year-end adjustments. The resulting balances were used to prepare draft financial statements which showed a draft profit for the year of $38000. The bookkeeper made the following entries.
What is the corrected profit for the year?
DCorrect answer
At the end of a financial period, the trial balance of a business did not agree. A suspense account was created. The business does not maintain control accounts. The following errors were then discovered.
After correcting these errors, the suspense account had no remaining balance. What was the opening balance on the suspense account?
DCorrect answer
The following financial information is available for a business.
The following error has been discovered.
CCorrect answer
A business prepared a trial balance which included a suspense account. The following matters were then identified.
After the appropriate corrections were made, the trial balance totals agreed. What was the trial balance difference used to open the suspense account?
BCorrect answer
An inexperienced bookkeeper made entries for year-end adjustments. The resulting balances were used to prepare draft financial statements which showed a draft profit for the year of $38000. The bookkeeper made the following entries.
What is the corrected profit for the year?
DCorrect answer
Which error will cause an entry in the suspense account?
ACorrect answer
The totals of a trial balance did not agree. The difference of $600 was recorded as a debit balance in a suspense account. The following errors have now been corrected, but a balance remained on the suspense account.
What was the debit balance on the suspense account after these errors were corrected?
DCorrect answer
A business maintains an allowance for irrecoverable debts at 5% of trade receivables. After accounting for the allowance, the draft profit for the year was $54000. The following items had not yet been taken into account.
What was the revised profit for the year?
CCorrect answer
Motor vehicles purchased for $530000, at the start of the year, have been incorrectly depreciated for the whole year, using the straight-line method at 10% instead of 25%. Ledger balances after the entries have been posted are as follows:
Which entries will correct the error?
ACorrect answer
A trial balance does not balance and a suspense account is opened. Later the following errors are found and the suspense account is cleared. 1 A sales invoice for $1240 had been completely omitted from the books. 2 The figure for total purchases had been entered as $85 600. The correct amount should have been $87 580. 3 Rent paid of $2600 had been entered correctly in the cash book but entered as $6200 in the rent account. What was the original balance on the suspense account? A $1620 credit B $1620 debit C $5580 credit D $5580 debit
ACorrect answer
A trader has calculated a draft loss for the year of $320. However, the following adjustments have still to be made. 1 Irrecoverable debts of $930 were recovered. 2 The allowance for irrecoverable debts had been $520. The required allowance is to be 5% of trade receivables. Trade receivables totalled $9600. What is the revised profit or loss for the year? A loss of $1210 B loss of $1730 C profit of $130 D profit of $650
DCorrect answer
The totals of a trial balance did not agree. As a result, a suspense account was opened with a credit balance of $1720. So far, two errors have been discovered: 1 The balance of the purchases returns account of $440 was omitted from the trial balance. 2 The bank overdraft balance was understated by $90. What will be the updated credit balance of the suspense account after these errors are corrected?
ACorrect answer
The cost of a new machine has been debited to the repairs account. What type of error is this?
CCorrect answer
A suspense account was opened to record the difference on a trial balance. After further investigation, the following errors were discovered. 1 Discount received of $250 had been debited to the discount allowed account. The entry to the trade payable account was correctly made. 2 Electricity refund of $170, entered correctly in the cash book, had been treated as electricity expense. 3 Machine installation of $440 had been treated as machine repairs. After correcting the errors, the trial balance agreed. What was the opening credit balance on the suspense account?
DCorrect answer
A business maintains control accounts as part of its double entry system. Which error would cause an entry in the suspense account? A A purchases journal total of $9870 is incorrectly posted as $9780. B Carriage outwards is credited to the carriage outwards account but correctly accounted for in the cash book. C Discounts allowed are debited to the discounts allowed account and credited to the purchases ledger control account. D Repairs to a vehicle are debited to the vehicles account.
BCorrect answer
The draft profit for the year of a business was $84000. The following errors were then discovered.
What is the corrected profit for the year?
DCorrect answer
After the profit for the year was calculated, the following errors were discovered.
What will be the effect on the profit for the year after correcting these errors?
DCorrect answer
A business’s suspense account appears as follows:
Which statements are correct?
CCorrect answer
A business maintains control accounts as part of its double entry system. Which error would cause an entry in the suspense account? A A purchases journal total of $9870 is incorrectly posted as $9780. B Carriage outwards is credited to the carriage outwards account but correctly accounted for in the cash book. C Discounts allowed are debited to the discounts allowed account and credited to the purchases ledger control account. D Repairs to a vehicle are debited to the vehicles account.
BCorrect answer
The draft profit for the year of a business was $84000. The following errors were then discovered.
What is the corrected profit for the year?
DCorrect answer
Zain’s business financial year ended on 31 December 2025. On this date, he prepared a trial balance and the totals did not agree. The debit column total was $2349 less than the credit column total. Zain does not maintain control accounts. So far, the following errors have been discovered. 1 The balance of the purchases returns account was overstated by $609. 2 An invoice for $1460, received from H Limited for purchases, had been entered in the book of prime entry as $1640. 3 A credit note for $157, sent to C Limited, had been correctly entered in the book of prime entry but entered on the wrong side of the personal account. 4 The owner had taken goods for his own use valued at a cost of $450. This transaction had been recorded as follows: debit sales $450, credit drawings $450.
(a) Prepare journal entries to correct the errors. Narratives are not required. [7 marks]
(b) Calculate the balance that remains on the suspense account after the correction of errors 1 to 4, clearly stating whether it is a debit balance or a credit balance. [3 marks]
Zain is aware that not all the errors have been discovered and that a balance remains on the suspense account.
(c) Calculate the revised profit or loss for the year ended 31 December 2025 after errors 1 to 4 had been corrected. [5 marks]
Before the errors were corrected, the draft profit for the year ended 31 December 2025 had been calculated as $11 480.
(a)
(b)
(c)
J Limited’s financial year ended on 31 December 2025. The following information was available after the preparation of the company’s statement of profit or loss for the year ended 31 December 2025.
The following errors and omissions were found when preparing this information: 1 No entries had been made to record a bonus issue of shares made on 1 November 2025. The bonus issue was of 2 ordinary shares for every 3 ordinary shares in issue at this date. It had been decided that reserves should be left in their most flexible form. 2 On 31 December 2025:
(a) Calculate the revised profit for the year ended 31 December 2025. Workings: [4 marks]
(b) Calculate the balance of retained earnings as at 31 December 2025. Workings: [3 marks]
(c) Prepare the statement of financial position at 31 December 2025. [8 marks]
(a)
(b)
(c)
Zain’s business financial year ended on 31 December 2025. On this date, he prepared a trial balance and the totals did not agree. The debit column total was $2349 less than the credit column total. Zain does not maintain control accounts. So far, the following errors have been discovered. 1 The balance of the purchases returns account was overstated by $609. 2 An invoice for $1460, received from H Limited for purchases, had been entered in the book of prime entry as $1640. 3 A credit note for $157, sent to C Limited, had been correctly entered in the book of prime entry but entered on the wrong side of the personal account. 4 The owner had taken goods for his own use valued at a cost of $450. This transaction had been recorded as follows: debit sales $450, credit drawings $450.
(a) Prepare journal entries to correct the errors. Narratives are not required. [7 marks]
(b) Calculate the balance that remains on the suspense account after the correction of errors 1 to 4, clearly stating whether it is a debit balance or a credit balance. [3 marks]
Zain is aware that not all the errors have been discovered and that a balance remains on the suspense account.
(c) Calculate the revised profit or loss for the year ended 31 December 2025 after errors 1 to 4 had been corrected. [5 marks]
Before the errors were corrected, the draft profit for the year ended 31 December 2025 had been calculated as $11 480.
(a)
(b)
(c)
The following balances were extracted from the books of T plc after the preparation of the statement of profit or loss for the year ended 31 December 2024.
Retained earnings include a draft profit figure of $104 800. However, it has been discovered that some errors had been made when preparing the statement of profit or loss. 1 The closing inventory had been overstated by $4500. 2 Distribution costs included the total cost of a 9-month advertising campaign for $32 400, which will end on 31 May 2025. 3 Furniture and equipment had been depreciated by 15% per annum using the reducing balance method instead of 20% per annum using the reducing balance method. 4 Debenture interest is payable every half year. No adjustment had been made for the payment due on 28 February 2025. 5 No provision had been made for taxation of $14 800.
(a) Calculate the revised profit for the year ended 31 December 2024. [7 marks]
Workings:
(b) Complete the statement of changes in equity for the year ended 31 December 2024. [7 marks]
1 On 1 August 2024, the directors had made a bonus issue of two ordinary shares for every three ordinary shares held at that date. The company policy is to maintain reserves in their most flexible form. Ordinary shares have a face value of $0.50 each. 2 On 1 October 2024, the directors had paid a dividend of $0.03 per share on all shares in issue at this date. 3 At 31 December 2024, the directors decided to revalue the property to $680 000.
Workings:
(c) Prepare the statement of financial position at 31 December 2024. [9 marks]
(d) Advise the directors which option they should choose. Justify your choice by considering the advantages and disadvantages of both options. [7 marks]
The directors are considering two options of financing the redemption of debentures in 2025: option A: make a new issue of 250 000 ordinary shares of $0.50 each at a premium of $0.10 per
option B: make an issue of 8% debentures (2030).
(a)
(b)
(c)
A trainee accountant recently produced the financial statements for a business for the year ended 31 December 2024. However, the following errors were discovered. Error
The business sells all goods with a mark‑up of 20%. The draft profit for the year ended 31 December 2024 was $36 960.
(a) Complete the table to identify and describe the accounting concept which has been ignored in each of the errors. [8 marks]
(b) Calculate the revised profit for the year ended 31 December 2024. [6 marks]
The owner of the business wishes to correct the errors that the trainee accountant has made.
(c) State which accounting concept should be applied when deciding whether or not to record this asset in the statement of financial position. [1 marks]
The business has a highly skilled workforce, and the owner is of the opinion that this asset should be reflected in the statement of financial position.
(a)
(b)
Virat prepared the trial balance at 28 February 2025, the end of his financial year. However, the totals did not agree. Control accounts are not maintained by the business. A check of the entries in the books of account revealed the following errors. 1 A sales invoice, $80, had been debited to the account of Rafiq instead of Raif. 2 A credit note, $170, received from P Limited had been correctly recorded in the book of prime entry but had not been posted to the personal account. 3 No record has been made of goods taken by Virat for personal use, valued at cost, $330. 4 The total of the discount received column in the cash book, $97, had been debited to the discounts allowed account as $79. 5 No entries had been made to record the receipt of $370 from Abdul, a credit customer. The balance of his account had been written off in 2024.
(a) Prepare journal entries to correct the errors. Narratives are not required. [8 marks]
(b) Calculate a revised figure for profit for the year ended 28 February 2025. [5 marks]
Before the errors were corrected, a draft statement of profit or loss for the year ended 28 February 2025 had been prepared, showing a draft profit for the year of $37 320.
(c) Explain why an error of principle would have no effect on the agreement of trial balance totals. [2 marks]
(a)
(b)
(c)
trial balance totals. An error of principle results in matching (1) debit and credit entries (1) so agreement of the trial balance totals is not affected.
Sara and Viraj are in partnership and own a wholesale business. At 1 January 2024, the partners had the following balances.
During the year ended 31 December 2024, the following drawings had been recorded.
The following balances were also available at 31 December 2024.
The draft profit for the year ended 31 December 2024 was $9400 before accounting for the following: 1 Wages, $850, were owing. 2 A credit customer, owing $1200, had gone out of business. The partners believe that 20% of the amount outstanding will be recovered, and the remaining 80% is to be written off. 3 The partners have decided to create an allowance for irrecoverable debts of 5% of trade receivables. 4 Viraj had taken goods for own use valued at cost, $550. 5 Viraj had provided a loan to the partnership on 1 May 2024 of $7200 at 8% interest per annum. The loan is repayable in full at the end of five years. Interest on the loan had not been accounted for. 6 Closing inventory had been understated by $3000. 7 Sara had introduced into the business a motor vehicle, valued at $20 400, on 1 September 2024. Motor vehicles are depreciated by 20% per annum using the straight‑line method on a month‑by‑month basis.
(a) Calculate the revised profit for the year ended 31 December 2024. [8 marks]
(b) Prepare the appropriation account for the year ended 31 December 2024. [3 marks]
The partners share profits and losses in the ratio Sara : Viraj, 2 : 1, after providing for the following: 1 Interest is charged on each partner’s drawings at 5% on the total of drawings for the year in excess of $10 000. 2 Sara is entitled to a salary of $12 000 per annum.
(c) Prepare the current account of Viraj for the year ended 31 December 2024. Dates are not required. [4 marks]
(d) Prepare an extract from the statement of financial position at 31 December 2024 showing the capital and liabilities section only. [4 marks]
On 31 December 2024, the balance of Sara’s current account was $15 070 debit.
Capital and liabilities
(e)(i) Explain, with reference to an accounting concept, the correct treatment of: goods taken for own use by the owner of a business [2 marks]
(e)(ii) Explain, with reference to an accounting concept, the correct treatment of: irrecoverable debts. [2 marks]
(f) Advise the partners which option they should choose. Justify your answer by discussing both options. [7 marks]
The partners are concerned about the liquidity of the business. The current credit terms are 30 days for both credit suppliers and credit customers. They have noticed that some credit customers are delaying the settlement of their invoices, whilst credit suppliers are always paid within 30 days. They are considering two options: Option A: introducing a 5% cash discount for all credit customers’ invoices settled within 25 days. Option B: paying credit suppliers within 35 days.
(a)
(b)
(c)
(d)
(e)(i)
(i) goods taken for own use by the owner of a business Concept: business entity concept (1) Explanation: only transactions affecting the business are recorded in the business’s books of account (1). The business and owner are two separate (legal) entities (1) Max 1 mark for explanation Accept other valid responses.
(e)(ii)
(ii) irrecoverable debts Concept: prudence concept (1) Explanation: profits and assets OR trade receivables should not be overstated (1) losses should be accounted for as soon as they are recognised (1) Max 1 mark for explanation Accept other valid responses.
(f)
discussing both options. Option A (max 3) For The early settlement will improve the cash flow position/liquidity (1) May reduce possibility of irrecoverable debts (1) Might attract new customers so increasing revenue/sales (1) Trade receivables turnover will improve (1) Against Will reduce the amount of cash received (1) Expenses will increase due to higher discount allowed (1) Will reduce the amount of profit (1) Customers may not be encouraged to pay within 25 days (1) Customers may switch to other suppliers offering better terms so reduces revenue (1) Option B (max 3) For Improve the cash flow position/liquidity (1) Against It may damage the reputation of the business (1) It may result in the loss of cash discounts (1) It may cause a loss of suppliers/refuse credit terms (due to the extended settlement terms) (1) Suppliers may charge interest on late payment (1) Decision supported with a comment (1) Accept other valid responses
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