- This topic has 9 replies, 4 voices, and was last updated 3 years ago by
.
- Posts
Bond’s trial balance failed to agree and a suspense account was opened
for the difference. Bond does not maintain control accounts for sales and
purchases. The following errors were found in Bond’s accounting records:
1 In recording the sale of a non-current asset, cash received of
$33,000 was credited to the disposals account as $30,000.2) An opening accrual of $340 had been omitted.
3) Cash of $8,900 paid for plant repairs was correctly accounted for in
the cash book but was credited to the plant cost account.4) A cheque for $12,000 paid for the purchase of a machine was
debited to the machinery account as $21,000.
Which of the errors will require an entry to the suspense account to
correct them?A 1, 3 and 4 only
B All
C 1 and 4 only
D 2 and 3 onlySHOULDNT THE ANSWER BE {C} SINCE 2 & 3 WOULD NOT REQUIRE A SUSPENSE ACCOUNT IF IF THOSE ENTRIES ARE INCORRECT TRAIL BALANCE WOULD STILL TALLY??
THANKS IN ADVANCE
For (2), it means that one balance was missed out at the start of the year, which means that the balance on the account at the end of the year is wrong. If just one balance is wrong then the trial balance will not balance.
For (3), the correct entry would have been to credit cash and debit plant repairs. They have not debited an account but have credited an account by mistake. Therefore the trial balance will not balance.
Of course the answer is B. Read my reply again!!
You are presumably happy that 1 and 4 need a suspense account because that is what you wrote.
I have explained why 2 and 3 also need a suspense account, which is what you asked about!!Why have you posted this? That is exactly what I have already posted in my reply to shaunak – that all of the errors are corrected using a suspense account!!!
Hello Sir,
Could you explain why 1 & 4 need to be corrected by suspense accounts?
Is it because they’ve specified that “cash received of $33,000 was credited to the disposals account as $30,000”, so the Cr side of the T.B. would be Undercast,
and “A cheque for $12,000 paid for the purchase of a machine was debited to the machinery account as $21,000”, so the Dr side of the T.B. would be Overcast?-I’m not sure of the reasoning
For 1, the debit and the credit are of different amounts. Therefore the trial balance will not balance and the suspense account is needed. The question does not ask which side of the trial balance is wrong and so that is not relevant.
For 4, exactly the same applies as for 1. If the debit and the credit are of different amounts the trial balance will not balance.
Have you watched my free lectures on this? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
I see, so they won’t balance. Thank you sir!
I have watched the lectures I was just unsure of the question.
- The topic ‘CORRECTION OF ERROR AND SUSPENSE ACCOUNT’ is closed to new replies.