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16.9 The suspense account shows a debit balance of $100. What could this balance be due to?
A)Entering $50 received from A Turner on the debit side of A Turner’s account
B)Entering $50 received from A Turner on the credit side of A Turner’s account
C)Undercasting the sales day book by $100
D)Undercasting the purchases account by $100Why is the answer D? surely D is if the entry was a credit in the suspense account because purchases are on the left side of the trial balance?
hi Jack..
A– is incorrect because when we receive $50 we make entry by mistake as following:
Dr Cash 50$
Dr T/receivable 50$
in this case we need to open a suspense account with credit balance (100$) in order to make balanceB– is incorrect because when we receive $50 we make entry by mistake as following:
Dr Cash 50$
Cr T/receivable 50$
actually this is correct entry, we did not make mistake and we dont need suspense accountC– is incorrect because sales day book does not affect trial balance
D– is correct answer because when we undercast purchase account by 100$, it means that our wrong entry is as following:
Cr Purchase 100$
in this case we need to open suspense account with debit balance 100$
( example- lets suppose we made purchased of 300 $, the correct entry must be :
Dr Purchase 300$, Cr Cash 300$,
but we made mistake by undercasting 100$ and we made entry only 200 $ in purchase account :
Dr Purchase 200$ , Cr Cash 300 $ to make balance we need to open suspence with debit balance of 100$.. that is why the correct answer is D.i hope i could help you.. 🙂
Although Murad is more or less correct, I must clarify a couple of things.
Firstly, with regard to C:
The sales day book does affect the trial balance because we take the total of the sales day book and debit receivables, credit sales with that total.
If the total is wrong, then the balances on both receivables and sales accounts will be wrong. However the debit will equal the credit and therefore the trial balance will balance. There is no need for a suspense account.With regard to D:
If the purchases account has ben undercast it means that it has been under added. The purchases account is always a debit balance and so if it has been under added then the debit balance will be too small.
So….on the trial balance, the total of the debits will be smaller than the total of the credits.
We therefore open a suspense account to make it balance – we need a debit balance.(In fact, if this company is using sales day book and purchase day book, then the individual balances in the receivables ledger (Mr Turner etc) are note only and not part of the double entry and do not appear in the trial balance. (It is total receivables and total payables accounts where we have the double entry.
So again, both A and B are not relevant and will not affect the trial balance)by process of elimination i got D also.
However the question says the balance in the suspense account is DR which means the correction would have been a CR in the purchases account (reduce expense)) this is wrong surely.Also this says balance in suspense account & not the suspense account figure in the trial balance?
The balance on the suspense account (before we correct errors) is whatever balance is needed to make the trial balance balance.
With regard to the correction, we need to debit purchases (to make the balance bigger) and the double entry will be to credit suspense account.
Given that the suspense account did have a debit balance, when we credit the suspense account then the balance disappears (because no everything is correct and the trial balance will balance)
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