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Hi John
I was looking through some corrections of an ACCA practice exam and on a question about ledger balances (where you add them up) they have written ‘discounts received expense’. I am just wondering why they have put the word expense there?
Also, could you help clarify something that is confusing me? Both discounts allowed and discounts received are debit balances. why is that (i.e. what is the logic behind that?)
Thank you in advance for any help you give.
Discounts received are not an expense – they are income.
Also, discounts received will be a credit balance, not a debit balance!
Without seeing the actual question, I don’t know who has put the corrections you mention, or why 🙂
Hi John,
thanks for your response. it is an official ACCA practice exam so I am not sure I am allowed to type it here. may i retype it here with some details altered? alternatively can i email you a screenshot?
Hi John sorry about the delay in responding. Here is the question:
Mary has the following ledger balances in her general ledger:
$
Capital 6260
Cash at bank 890
Discounts allowed 1500
Discounts received 2300
Expenses 15910
Non-current assets (carrying amount) 31845
Opening inventory 4820
Purchases 71470
Payables 6930
Receivables 15870
Sales 126,970What is the balance required in a suspense account to make Mary’s trial balance agree?
-$155 Cr
-$155 Dr
-$1445 Cr
-$1455 Drcorrect answer $155 Dr
Mary’s trial balance looks like this:
Capital 6260 CR
Cash at bank 890 DR
Discounts allowed 1500 DR
Discounts received (left blank)
Expenses 2300 CR
Non-current assets (carrying amount) 31845 DR
Opening inventory 4820 DR
Purchases 71470 DR
Payables 6930 CR
Receivables 15870 DR
Sales 126,970 CRtotal DR: 142305, total CR: 142460
155Dr
=Total Dr: 142460, Total CR: 142460On the original trial balance, the debits are less than the credits by 155.
So there will be a debit balance on the suspense account of 155 to make the trial balance add up OK.This seems to be all that the question asked, and so the answer is indeed B.
What isn’t asked for is to identify where the mistake was that caused the trial balance not to balance. It could have been a mistake on the discount received account (which is currently a credit of 2,300). If the mistake was there, then we would need to debit the discounts received account and credit the suspense account with 155 to correct it.
Have you watched my free lecture on suspense accounts? The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
Hi John
thank you for your response. I understand we just have to assign each balance to the correct side of the t-account and add them up to find where the difference is in the totals.
however this part confuses me:
Discounts allowed 1500 DR
Discounts received (left blank)
Expenses 2300 CRI think that ‘Discounts Allowed’ is an expense, so debit balance. But why have they left Discounts Received blank, then put the discounts received figure by Expenses? I thought maybe they were suggesting that the Discounts Received were an expense. Also they have not included the Expenses figure.
I have copied the question and the answers exactly as they have written them. Did they just make a typing error in the answers
by the way, the “(left blank)” is my addition, they have just not shown any figure there, hence why I wrote that to indicate that
The answer B is correct (for the reasons I explained in my previous answer).
Why on earth they have typed out a new trial balance I have no idea (because there is no need for it) and it does seem that they have made a typing error in it anyway. Discount received is never an expense 🙂
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