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A company’s trial balance totals were:
Debit: $387,642
Credit: $379,511A suspense account was opened for the difference.
which one of the following errors would have the effect of reducing the difference when corrected?
A. The petty cash balance of $500 has been omitted from the trial balance.
B. $ 4000 received for rent of part of the office has been correctly recorded in the cash book and debited to rent account.
I answered B, but the given answer is A.Please explain……..Thank you.B is not correct because the trial balance will not balance will not balance is the debit does not equal the credit and only then is there a suspense account.
For B, although the entry was wrong, the debit does equal the creditFor A, if one balance is missed from the trial balance then it will not add up – therefore a suspense account will be created to deal with this.
(You will find it useful to watch the free lecture on this)
Sorry Tutor, cause post in this topic, but in my kit from BPP, B is the given answer and i think it is right cause it will have the effect of reducing the difference when corrected.
i also have a question.
4,600 paid for motor van repairs was correctly treated in the cash book but was credited to motor vehicles asset account.
my work for this error: we need suspense account and entries in suspense account are:
opening balance: debit 9,200
motor vehicles asset account: credit 4600
motor van repairs expense: credit 4600please tell me my answer is right or wrong, when im wrong, tell me why, thank you so much.
Sorry – I was wrong in my previous answer. I must have been tired 🙁
Petty cash is a debit balance and so when it is included in the trial balance (as it should be) then the total of the debits will be treated which increases the difference.With regard to the rent, because it was rent received it should be credited to rent (not debited) and so correcting this will reduce the debits and increase the credits, which will reduce the difference.
With regard to your question.
The payment for repairs should have been debited to the repairs account, not credited to the assets account.
So to correct the error we need the following entries:
DR Asset account (to remove the credit entry which should not be there) 4,600
DR Repairs account (to make the correct entry) 4,600
CR Suspense account 9,200It will mean that (assuming there were no other errors) the opening balance on the suspense account will have been a debit of 9,200
Hi
Relating to the question above I also don’t understand
In the BPP the correct answer is
B. 4,000 received for rent of part of the office has been correctly recorded in the cash book and debited to rent account.I already read your explanation above but still I don’t get it
Could you please explain by the way of correcting this errors using journal entry? Thanks
I got it now at first I’m a bit confuse with rent account I thought it’s only rent income.
I have one more doubt in this question the balance on the suspense account balance is Dr. 8,131(Debit: $387,642
Credit: $379,511)
So this question ask for reducing suspense a/c but when we corrected the error the suspense a/c also the debit balance. For me I’m confusing about it why debit side the same reduce each other.
Could you further explain about this?The opening balance on the suspense account is a credit balance of 8131 (in order to make the trial balance balance)
I do suggest that you watch the free lecture on suspense accounts.
Hi John
In relation to the original thread here one of the options C was:
$3,000 Paid for repairs to plant has been debited to the plant asset account.
My workings would be:
Dr Suspense 3,000
Cr Plant Asset 3,000This too would reduce the balance. Is this correct?
No. The correct entry is Cr Cash Dr Repairs.
What they have done is Cr Cash Dr Asset – that is wrong, but the Dr does equal the Cr and so the suspense account is not affected.
The entry to correct the mistake is Dr Repairs Cr Asset.The trial balance of Z failed to agree, the totals being: debit $836,200
credit $819,700
A suspense account was opened for the amount of the difference and the following errors were found
and corrected:
1 The totals of the cash discount columns in the cash book had not been posted to the discount
accounts. The figures were discount allowed $3,900 and discount received $5,100.
2 A cheque for $19,000 received from a customer was correctly entered in the cash book but was
posted to the control account as $9,100.
What will be the remaining balance on the suspense be after the correction of these errors?I just can not understand why discount received is Cr. It shall be as follows:
Dr. Discount received
Cr. Payables
So if I missed to post then first stage shall be
Dr. Suspense Account then Cr. Suspense account and Dr Discount Received?
Thank youThe correct entry for discount received is Dr Payables (to reduce the amount owing) and Cr Discounts received (to record the income).
I do suggest that you watch my free lectures. They are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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