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Hi, I’m studying FA1 topic suspense account and came across below question.
– When a trial balance was prepared, two ledger accounts were omitted:
Discount received $ 6,150
Irrecoverable debt $ 7,500To balance the trial balance, a suspense account was opened.
What was the balance on the suspense account ? (options are as follows)
Debit $ 1,350 (this is the correct answer)
Credit $ 1,350 ( I had selected this option)
Debit $ 13,650
Credit $ 13,650Could you please clarify why it’s a debit 1,350 ?
The discount received is a CR amount as it is income
The irrecoverable debt is a DR amount as it is an expense.If these are omitted then there is too little DR in the TB by 7,500 and too little CR in the TB by 6,150. SO net 1,350 too little DR. To make the TB balance this missing 1,350 would have to be included on the DR side as a suspense account.
Hi Ken, sorry it is still not clear. Could you please elaborate it in any other way. Thanks.
The dc received should have appeared on the TB as a CR balance. It didn’t so the TB would have added up with DR column would have exceeding the CR column by 6150.
The irrecoverable debt should have appeared on the TB as a DR amount. It didn’t so if that had been the only error then the CR column would have exceeded the DR column by 7500
Both errors together mean that the CR column exceed the DR column by a net 1350. To make the TB balance an extra DR amount of 1350 is needed. That is the amount of the suspense account.
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