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The trial balance of a trader failed to agree.He placed the difference in a Suspense Account and subsequently discovered the following errors:
(1) A credit sale of goods,valued at $107,had been posted to the credit of David’s account,instead of debit.
(2)An invoice received from Betty, $261, had been mislaid. Entries for this transaction had ,therefore,not been made.
(3)The Sales Day book was overcast by $128
(4)The total of the returns outwards book $158 had not been posted to the ledger.
(5)Cash purchases of $1520 had been entered in the Cash Book correctly, but had been entered in the Purchases Account as $1250
(6)$300 paid for advertising charges had been debited to the personal account of the advertising director.
required: prepare a suspense account indicating the original difference in the book
I had calculated the original difference is $484 ,but the answer in the book is $454,Which one is correct?Thank you
The correct answer is $454.
Does your book not show workings for the answers? 🙂
(1) Debit suspense with 214
(2) No effect
(3) Debit suspense with 128
(4) Credit suspense with 158
(5) Debit suspense with 270
(6) No effectThank you for your reply. 🙂
The book didn’t show any workingI have seen another post you had replied before that daybook or journal will not affect the trial balance, so that is no need to open a suspense account , so I have a little bit confuse about the question 3 and 4.
question 4 the ledger mean general ledger or creditor ledger?
Can you explain to me?Thank youI don’t know what book you are using, but you really should use a Revision Kit from one of the ACCA approved publishers. Not only are the questions all exam standard, but they also show workings for their answer 🙂
The question should have said that the entries in the personal ledgers (the receivables and payables ledgers) are part of the double entry and that they do not therefore keep control accounts. (Questions in the real exam would say so if this were the case.)
So for (3) they will have entered correctly in the receivables ledger, but the total being credited to the sales account will have been wrong.
Similar for (4) they will have entered correctly in the payables ledger, but not entered in the returns account in the general ledger.It is a poorly worded question – again exam questions would tell you if they were not keeping control accounts (which is unusual anyway).
Maybe the question not clearly stated so I don’t understand what the question wants.
May I ask one more question that
closing stock was undervalued by $280
I don’t know it should open a suspense account or not and debit credit which accountValuing the inventory wrongly does not affect the suspense account.
If it is undervalued, then correcting it increases the asset on the Statement of financial position and increased the profit in the Statement of profit or loss.
(The double entries are not important for the exam, but are dealt with in my free lectures on inventory)
We stopped calling it ‘stock’ many years ago – it is ‘inventory’! 🙂
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