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John Moffat.
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hymian
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Jamie’s Cars have a balance on their suspense account of $324 debit.
Which TWO of the following could independently of each other explain this?
A Cash sales of $162 debited to the sales account, but correctly recorded in cash
B An invoice for materials for $324 debited to wages, but correctly recorded in trade payables
C Omitting the discounts allowed account of $324 from the trial balance
D Rent paid of $162 credited to the rent account, but correctly recorded in cashHello sir, can u explain this? The answer is C and D, but I don’t understand:
– Why is A wrong? The correct entry for A should be Dr Cash Cr Sales, but only the entry for cash is correctly recorded so to correct the sales entry we should credit twice to sales account and debit twice to suspense account, which is equal to $324 debit balance in suspense account, isn’t it?
John Moffat
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At the moment there is a debit balance on suspense because at the moment the total credits are greater than the total debits.
If sales have been debited instead of credited then this would have made the total debits higher than the total credits.
To correct the mistake we would Cr Sales and Dr Suspense account, but this would then make the balance on the suspense account 648 Dr. After correcting the errors the balance on the suspense account must be zero.
Have you watched my free lectures on suspense accounts?
hymian
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Thanks for reply! Yes, I have finished watching all lectures.
John Moffat
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You are welcome 🙂
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