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Sir, can you explain the logic behind answering these type of questions, I am kind of lost and mixed up.(WATCHED your lectures)
A purchase return of $48 has been wrongly posted to the debit of the sales returns account, but has been correctly entered in the suppliers account.
Which of the following statements about the trial balance is correct?
A. The Cr side is 48 more than the debit
B.The debit side 48 more than the Cr side.
C.The credit side to be 96 more than the debit side.
D.The debit side to be 96 more than the credit.The answer is D.
I know for a fact C and A are not answers. Why is B not an answer?Are these questions asked in the perspective of the suspense accounts/post rectification or pre rectification?
Because, the rectification entry would be(Correct me if im wrong)
Suspense a/c Dr 96
Cr Purchase returns 48
Cr sales returns 48 (Writing off this ac)I will answer in two ways:
Firstly, they should have made a credit entry of 48 in purchases returns. If all they had done was not make this entry, then the total of the credit would be too small – the total of the debits would be higher by 48.
However, in addition they made a debit entry of 48 in sales returns. This makes the total of the debits higher still.
So the debits are now higher than the credits by 96.Second way: (and you have answered it yourself with your correcting entry, which is right).
When the trial balance is prepared, the debits will be higher than the credits by 96, so a suspense account will be created with a credit balance of 96 – so that the trial balance now balances.
When you put through the correct entries as you have typed, you debit the suspense with 96 and the balance on suspense is now zero and the trial balance is now correct.
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