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Hello sir , I am having a slight issue understanding this question.
When Nicola extracted her trial balance , the total of the debit balances exceeded the total of the credit balances by $1000. she opened a suspense account to make the two totals equal. She then discovered that an invoice received for property repairs for $1000 was entered as $ 500 on the credit side of the property repairs account.
What is the revised balance on the suspense account when Nicola corrects this error?
A.$ Nil
B $2000 debit
C.$2000 credit
D.$3000 creditThanks 🙂
The entry for repairs should have been to debit repairs with 1,000 (not credit it with 500).
So to correct it we need to debit repairs with 1500 and credit suspense account with 1500.
Since the suspense account started with a credit balance of 1,000, the revised balance is a credit of 2500.
This means that either you have not typed out the question correctly, or there is a mistake in whichever book you are using. (If it is from the current edition of the BPP Revision Kit then tell me which question and I will check).
Hello sir , This is the correct one
When Nicola extracted her trial balance , the total of the debit balances exceeded the total of the credit balances by $1000. she opened a suspense account to make the two totals equal. She then discovered that an invoice received for property repairs for $1500 was entered as $ 500 on the credit side of the property repairs account.
What is the revised balance on the suspense account when Nicola corrects this error?
A.$ Nil
B $2000 debit
C.$2000 credit
D.$3000 creditCan you detail why the suspense account $3000 Credit?
In order to make the trial balance totals equal, they will have opened a suspense account with a credit balance of $1,000.
For the repairs, the correct entry should have been to debit repairs with $1500 (not credit it with $500). So to correct it they need to debit repairs with $2,000 and credit the suspense account with $2000.
So they will end up with a balance on the suspense account of 1,000 + 2,000 = $3000 credit.
Have you watched my free lectures on suspense accounts? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well 🙂
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