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Hi I am very confused with correction or errors using suspense account.
Here’s the question:
1. petty cash balance, $80, omitted from the trial balance
2. The cash account of $500 had been omitted from the list of balances.
Ans:
My answer is:
1. Dr petty cash
Cr Suspense
2. Dr cash
Cr Suspense
is this correct?Suspense accounts are invented to make the trial balance balance. Trial balances do not balance if there is a one-sided error of some sort. So, debiting and piece of expenditure to wages rather then plant and equipment will not cause a suspense account.
If petty cash of 80 was left out, the Drs in the TB would be too little by 80 so a suspense account of 80 Dr would be invented to make it balance. Now that we have found the error the adjustment is simply Cr suspense account 80 and ensure 80 is listed as cash in the TB.
The second example is similar. Note that there is no need to Dr PC or Cash: the double entry is fine. It’s simply that two accounts have been left out of the TB.
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