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Q1:A suspense account was opened when a trial balance failed to agree.The following errors were later discovered.
>A gas bill of $420 had been recorded in the gas account as $240
>A discount of $50 given to a customer had been credited to discounts allowed.
>Interest received of $70 had been entered in the bank account only.
What was the original balance on the suspense account?
A)Debit $210
B)Credit $210
C)Debit $160
D)Credit $160
The correct answer is A but have no idea how is that correct.Q2:The bookkeeper of field made the following mistakes :Discounts allowed $3,840 was credited to the discounts received account Discounts received $2,960 was debited to the discounts allowed account.
Which journal entry will correct the errors?
A)Discounts allowed(Dr $7,680),Discounts received(Cr $5,920),Suspense account(Cr $1,760)
B)Discounts allowed(Dr $880),Discounts received(Dr 880),Suspense account(Cr $1,760)
C)Discounts allowed(Dr $68,00),Discounts received(Cr $68,00)
D)Discounts allowed(Dr 3,840),Discounts received(Cr 2,960),Suspense account(Cr $880)
The correct answer is B but again have no idea idea how is that correct.
Help with a little bit explanation is much appreciated.
Thanks.If you wish for me to answer then you must ask in the F3 Ask the Tutor Forum – this forum is for students to help each other 🙂
@johnmoffat said:
If you wish for me to answer then you must ask in the F3 Ask the Tutor Forum – this forum is for students to help each other 🙂Don’t worry sir, your students are here….. 😉
Ans 1: A) $210 Debit
Illustration:
1) Gas bill has been recorded as 240 instead of 420.
This means that a debit entry of only 240 is made and an additional 180 (420-240) Debit entry is yet to be made, so that the double entry should be completed. So, we’ll debit the Gas Account with the remaining 180. For the credit entry, we’ll use Suspense Account.
Dr Gas Account $180
Cr Suspense Account $1802) Discount Allowed of $50 has been Credited instead of Debited.
The Discount Allowed A/c should have been DEBITED with $50, but instead its CREDITED with $50. For the rectification, we’ll first DEBIT the account to Nullify the effect of Credit entry.
Dr Discount Allowed $50
Cr Suspense Account $50
Now that the effect of wrong entry is nullified, we’ll make the original entry of $50.
Dr Discount Allowed $50
Cr Suspense Account $503) Interest Received of $70 has been recorded in bank account only.
The entry should’ve been:
Dr Bank $70
Cr Interest Received $70
But, only Bank A/c is debited with $70 & no Credit entry is made anywhere.
So, we’ll make the remaining Credit entry of $70 in Interest Rec account. Again, Suspense A/c will be used for the double entry.
Dr Suspense A/c $70
Cr Interest Received $70Now the balance on Suspense A/c is
70-180-50-50 = -210 or $210 CrWhich means that there was originally a balance of $210 Dr on Suspense A/c, which is balanced by above entries.
Ans 2: B)
Dr Discounts allowed $880
Dr Discounts received $880
Cr Suspense account $1,760Explanation:
a) Discount Allowed should’ve been DEBITED with $3,840, but it isn’t.
Instead, a mistake has resulted in it being debited with $2,960.
Meaning that now only $880 (3,840-2,960) needs to be DEBITED to complete the original entry of $3,840.b) Discount Received should’ve been CREDITED with $2,960, but it isn’t.
Instead, a mistake has resulted in it being Credited with $3,840. Meaning $880 (3,840-2,960) more is credited in it. So, we’ll have to reduce it by $880. For which we’ll have to make a DEBIT entry of $880.As both the Discount Allowed & Discount Received accounts need to be DEBITED with $880 each, so we’ll make the entry with Suspense Account being used for the Credit entry.
Dr Discount Allowed $880
Dr Discount Received $880
Cr Suspense Account $1,760 ($880+$880)Hope it helped you.
If you have any questions, feel free to ask. 🙂@secondstar said:
Ans 2: B)
Dr Discounts allowed $880
Dr Discounts received $880
Cr Suspense account $1,760Explanation:
a) Discount Allowed should’ve been DEBITED with $3,840, but it isn’t.
Instead, a mistake has resulted in it being debited with $2,960.
Meaning that now only $880 (3,840-2,960) needs to be DEBITED to complete the original entry of $3,840.b) Discount Received should’ve been CREDITED with $2,960, but it isn’t.
Instead, a mistake has resulted in it being Credited with $3,840. Meaning $880 (3,840-2,960) more is credited in it. So, we’ll have to reduce it by $880. For which we’ll have to make a DEBIT entry of $880.As both the Discount Allowed & Discount Received accounts need to be DEBITED with $880 each, so we’ll make the entry with Suspense Account being used for the Credit entry.
Dr Discount Allowed $880
Dr Discount Received $880
Cr Suspense Account $1,760 ($880+$880)Hope it helped you.
If you have any questions, feel free to ask. 🙂Again million thanks to you.
You are one hell of a tutor 🙂Your Welcome….. 🙂
Well thats all because of Sir @johnmoffat
He deserves the credit!
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