- This topic has 8 replies, 4 voices, and was last updated 9 years ago by
.
- Posts
A suspense account was opened when a trial balance failed to agree. The following errors were later discovered.
. A gas bill of $420 had been recorded in the gas account as $240.
. A discount of $ 50 given to a customer had been credited to discounts received.
. Interest received $70 had been entered in the bank account only.What was the original balance on the suspense account?
Ans:
Journal Entry to correct the errors:
Dr Cr
. Gas account 180
Suspense a/c 180. Disc. Received 50
Disc. Given 50
Suspense a/c 100. What will be the journal entry to correct the third error?
I am surprised that the entry is not given in whatever book in which you found the question!
It is:
Dr Suspense Account
Cr Interest received accountHi
The interest received was credited to the bank account only. Can we thus assume the suspense account was debited here? Because double entry rule. So to correct this we debit suspense and credit interest received as you stated. Is my assumption correct?Firstly, interest received will not be credited to the bank account – it will be debited to the account (because it is a receipt!!!).
Secondly, since the question says it has been entered in the bank account only, then there has not been a double entry (the credit should be to interest received).
So to correct the mistake we debit suspense account and credit interest received.
The bookkeeper of Peri made the following mistakes:
Discount allowed $3,840 was credited to discounts received account.
Discount received $2,960 was debited to discounts allowed account.
Discounts were otherwise correctly recorded.
Which one of the following journal entries will correct the errors?
A) Discount allowed 7,680
…..Discount received 5,920
……Suspense account 1,760
B) Discount allowed 880
…..Discount received 880
…..Suspense account 1,760
C) Discount allowed 6,800
…..Discount received 6,800
___________________________
this one is really confusing, I can’t understand the adjustments to be made and the consequent figure to be written in the suspense account. Please clear this one to me.The discount allowed is an expense and should be debited to the discounts allowed account (not credited to the discount received).
So to correct it we need to debit discounts allowed with 3840, debit discounts received 3840 (to cancel the credit) and credit suspense account with 7680.The discount received should be credited to the discounts received account (not debited to discounts allowed).
So to correct it we need to credit discounts received with 2960, credit discounts allowed with 2960, and debit suspense account with 5920.(Obviously you can net off the various entries and only show the net entries)
Lol sorry I meant interest received credited. Thank you John you’re explanations are extremely well put 🙂
- You must be logged in to reply to this topic.