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Hi
Please help.
The cash refund due to customer a was correctly treated in the cash book and then credited to the accounts receivable ledger account of customer b.
I would debit receivables of customer b and credit receivables of customer a which Is wrong because a suspense entry is needed here according to the answer.
Why is a suspense account entry needed here?You have already asked this in other F3 forum and received the correct answer!!
A cash refund is a repayment of cash to the customer.
So the correct entry is credit cash and debit the customer.What they have done is credit cash and credit the customer. So two credits, so the trial balance will not balance, so an entry is needed in suspense.
To correct the mistake, we need to debit customer B (to remove the wrong entry) and debit customer A (which is what the entry should have been). The double entry for both corrections is to credit the suspense account.
(If you are unsure what a refund it then you need to watch the free lecture on control accounts (it is simply a repayment of cash to the customer – maybe because they had paid us too much))
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