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Correction error and suspense account

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Correction error and suspense account

  • This topic has 4 replies, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • October 10, 2017 at 2:37 pm #410196
    kengara
    Member
    • Topics: 197
    • Replies: 107
    • ☆☆☆

    Hi My Dear Tutor, I have a question.

    Cash discount of 150$ on paying a supplier,JW, had been taken, even though the payment was made outside the time limit.

    AS we talk about discount paying to supplier it should be DISCOUNT RECEIVED

    DID.

    1) Debit trade payable-150
    credit discount-150

    2) should be
    Debit discount received -150
    credit trade payable150

    3)correction
    debit discount received-300
    credit trade payable-300

    why the correct answer shows 2)?this is because the double entry has not been made yet that is why 2) is correct?3 was correct when it would mention such as accounting entries made?DId i understand correctly?

    October 10, 2017 at 2:37 pm #410197
    kengara
    Member
    • Topics: 197
    • Replies: 107
    • ☆☆☆

    confused in this question

    October 10, 2017 at 3:25 pm #410213
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    When the company made the payment, they took a discount of 150 (and paid less than the invoice) and so they will have debited payables and credited discount received.
    That would have all been correct if they had been entitled to the discount.

    However, since they should not have taken the discount, they should not have made that entry (and they still owe the remaining 150).
    So the entry needs cancelling/removing. To cancel it we credit payables (so now they still owe the remaining 150) and we debit discounts received (so the balance on discounts received is now zero as it should be).

    October 10, 2017 at 4:53 pm #410233
    kengara
    Member
    • Topics: 197
    • Replies: 107
    • ☆☆☆

    thanks for explaining..usually when i do these kind of question i try to explain myself while doing and this one seemed to be confusing that is why asking..

    By the way open tuition helped to pass f1 f2 f3 f7 thanks for your support…

    October 11, 2017 at 4:39 pm #410380
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome (and congratulations on the passes 🙂 )

  • Author
    Posts
Viewing 5 posts - 1 through 5 (of 5 total)
  • The topic ‘Correction error and suspense account’ is closed to new replies.

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