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John Moffat.
John Moffat.-
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Alijavad2003
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Dear Sir,
Can you explain my question? The question is from Revision Kit (30.8 – question number)
– The payments side of the cash book had been understated by $10000
How can this error create a suspense account. Cash book consists of payments and receipts. As a result we have a balance after paying from our generated cash receipts. If our payments side is understated by $10000 so our cash balance will be overstated by $10000. It is my understanding.Can you please explain the question step-by step.
If this really creates a suspense account why the below situation does not create a suspense account
– The discounts received column of the cash payments book was overcast
Thanks in advance!
John Moffat
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If the payments side of the cash book has been added up wrongly then the closing balance will be wrong.
It is the closing balance that appears on the trial balance and on the SOFP and therefore they will not balance and a suspense account will be used.
As far as the discounts allowed column is concerned, the same total will be used for both the debit and credit entries and therefore things will balance and a suspense account is not needed.
Alijavad2003
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