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John Moffat.
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Okema24
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Question: The suspense account shows a debit balance of $100. What could this balance be due to? A Entering $50 received from A Turner on the debit side of A Turner’ s a/c. B Entering $50 received from A Turner on the credit side of A Turner’ s a/c. C Undercasting the ales day book by $100. D Undercasting the purchases a/c by $100. Kinda confused about the answer. Thanks!
Okema24
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Another: A suspenders/c shows a credit balance of $130. Which of the following could be due to? A. Omitting a sale of $130 from the sales ledger. B. Recording a purchase of $130 twice in the purchases a/c. C. Failing to write off a bad debt of $130. D. Recording an electricity bill paid of $65 by debuting the bank a/c and crediting the electricity a/c. ( Don’t quite understand how the answer is b, I assumed A at first.) Thanks!
John Moffat
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First question: The answer is D
If suspense has a debit balance, then the debit balances total less than the credit balances.
Purchases is a debit balance, and if has been undercast then it is too low.A and B are wrong, because individuals accounts do not appear on the trial balance.
C is wrong, because ti will mean that sales and receivables will both be too low – but since they will be of the same figure, the trial balance will still balance.John Moffat
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A credit balance on the suspense account means that the debit balances total more than the credit balances.
Purchases are debited to the purchases account, and so if you debit it twice the debit balance will be too high.
(A is wrong because sales ledger balances do not appear in the trial balance – only the sales ledger control account balance)
Okema24
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What about option C for question 2, what affect that would have?
John Moffat
- Topics: 57
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Failing to write of an irrecoverable debt (they are not called bad debts!) means there will be no debit and no credit – so the trial balance would still balance and it would not affect the suspense account.
Okema24
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Understood. Thanks! 🙂
John Moffat
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You are welcome 🙂
mp-open
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Hallo and Merry Xmas,
If in the second example, we want to write the suspense entry, for the correct asnwer B, I’d write it as:
Dr Suspense a/c 130
Cr Purchases 130– but the example says we have a Credit balance of the suspense a/c, so these two contradict, as if we have a credit balance in the suspense a/c then I would see it as:
Dr ??? a/c 130
Cr Suspense a/c 130Why these two entries are not the same, where am I wrong?
Thank you!
John Moffat
- Topics: 57
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There is a credit balance before the error is corrected.
When we correct the error we debit the suspense account, which then means there is zero balance (which is what we want when errors are corrected).
mp-open
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Hallo,
May I ask, what is the difference between omitting and failing to do an entry, both of these don’t require a correction with a suspense a/c, do they?
Thank you!
John Moffat
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Omitting means missing out.
Assuming that the whole entry is missed out (i.e. no debit and no credit) then it does not affect the suspense account.
mp-open
- Topics: 96
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Hallo,
Talking about example two, “failing to write off a bad debt of $130” – and your explanation
– failing to write of an irrecoverable debt (they are not called bad debts!) means there will be no debit and no credit – so the trial balance would still balance and it would not affect the suspense account.
By “no debit and no credit”, do you mean as for debit – debiting the irrec.debts a/c and for credit – crediting the A/R account?
Thank you!
John Moffat
- Topics: 57
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Yes – that is the entry that should have been made. But if they have not written off the debt then both the Dr and Cr will be missing (and so the trial balance would still balance – no need for a suspense account).
mp-open
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Yes, agree.
John Moffat
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You are welcome 🙂
Azai
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As you say only sales ledger control account appear in trial balance.
How the answer of first example ‘D” is right , Is purchase account and purchase control account is same?John Moffat
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The purchases account and the purchase ledger control account or not the same thing.
Do watch my free lectures on Books of Prime Entry.
Okema24
John Moffat
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Azai
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