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question 1)
Fred’s trial balance did not balance so he opened a suspense account with a debit balance of $346.
Control accounts are maintained for receivables and payables.
Fred discovered the following:
1 The sales day book was undercast by $400.
2 Purchases of $520 from the purchases day book have only been recorded in the payables ledger
control account.
3 Profit on sale of non-current assets of $670 had been recorded in the sundry income account as $760.
What is the remaining balance on Fred’s suspense account after these errors have been corrected?
A $264 credit
B $136 debit
C $956 debit
D $1,266 debitSuspense account has been opened, 2 and 3 items has been maintained but item 1 isn’t taken consideration
But why?
question 2)
cash $2800 paid for plant repairs eas correctly accounted for in the cash book but was credited to the discount received account
we should be opened suspense account for such situation??
1. Because the sales day book is not part of the double entry. The double entry will have made using the same (wrong) figure in both accounts and therefore the trial balance will still balance. So no suspense account.
2. Yes, of course. They have made two credit entries (cash and discounts received). They should have made a debit entry (to plant repairs account).
Please do watch my free lectures on all of this.
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