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The bookkeeper of Peri made the following mistakes:
Sales returns of $384 were credited to the purchases returns account. Purchases returns of $296 were debited to the sales returns account. Which one of the following journal entries will correct the errors?Answer. Dr Sales returns 88
Dr Purchases returns 88
Cr Suspense account 176I have watched all the lectures and read the chapter. I can’t understand how they arrived at the answer.
From the question, I infer that the the debit entry for sales return was right but it was wrongly credited to purchase returns account. The next entry had the Cr entry right (to Payables account) but debit entry was wrong. In that case, we don’t need any suspense to correct the entries. Why have they used suspense account and entries with confusing amounts.
The correct entry for the sales returns should have been to debit Sales returns with 384, not to credit purchase returns
The correct entry for the purchase returns should have been to credit Purchase returns with 296, not to debit sales returns.
So they have debited sales returns with 296 when they should have debited with 384. To correct it they need an extra debit of the difference of 88.
They have credited purchase returns with 384 when they should have credited with 296. To correct it they need a debit of the difference of 88.
Presumably in both cases the other entry had been made correctly (i.e. to receivables and to payables) otherwise we would have been told. So the double entry for the corrections is to the suspense account.
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