A limited liability company's trial balance does not balance. The totals are:
Debit $384,030
Credit $398,580
A suspense account is opened for the difference.
Which of the following pairs of errors could clear the balance on the suspense account when corrected?
A Debit side of cash book undercast by $10,000; $6,160 paid for rent correctly entered in the
cash book but entered in the rent account as $1,610.
B Debit side of cash book overcast by $10,000; $1,610 paid for rent correctly entered in the cash
book but entered in the rent account as $6,160.
C Debit side of cash book undercast by $10,000; $1,610 paid for rent correctly entered in the
cash book but entered in the rent account as $6,160.
D Debit side of cash book overcast by $10,000; $6,160 paid for rent correctly entered in the cash
book but entered in the rent account as $1,610.
Dear Mr. John,
I don't understand why the answer given by BPP is A not D.
Can you please explain?
Thanks,
Kevin
Ask the Tutor ACCA FA
BPP Revision Kit 29.6
9y ago#1Please don't type out full questions (because they are copyright of BPP). I have the BPP Revision Kit and so you only need say the question number :-)
Since the credits are bigger than the debits, a suspense account will be opened with a debit balance of the difference of 14,550.
For both A and D, the cash needs debiting with 10,000 and therefore the suspense account will be credited with 10,000. So there is now a debit balance of 4,550 on the suspense account.
With regard to the rent. For D, the rent account has been debited with 4,550 too much. So correcting it would mean crediting rent with 4,550 and debiting the suspense account with 4,550. This would increase the debit balance on the rent account and so this is not the correct answer.
For A, the rent has been debited with 4,550 too little. So to correct it we need to debit rent with 4,550 and credit the suspense account with 4,550. This would reduce the suspense account balance to zero, and therefore A is the correct answer.
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