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suspense account question how to do it ?

Forums › ACCA Forums › ACCA FA Financial Accounting Forums › suspense account question how to do it ?

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • October 9, 2021 at 5:02 am #637276
    jcafelatte
    Member
    • Topics: 14
    • Replies: 8
    • ☆

    the suspense account shows a debit balance of $100.what could this balance be due to ?

    A entering $50 received from A Turner on the debit side of A Turner’s account
    B entering $50 received from A Turner on the credit side of A Turner’s account
    C undercasting the sales day book by $100
    D undercasting the purchases account by $100

    I dont understand :
    – How to do the double entries for A. is it Debit cash (since we receive the money frm A Turner) so it should be credit the amount to A turner instead of debitting it ?
    – why is B wrong?
    – i know undercast means making the amount lower than what it should be. but im not sure what is the double entry for C and D. Mr john can you explain it ?

    October 9, 2021 at 8:11 am #637284
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51538
    • ☆☆☆☆☆

    A and B will not affect the trial balance because they refer to entries in the receivables ledger which is not part of the double entry.

    C is wrong because although the total of the sales day book is wrong, the same total will have been posted to both the sales account and to the receivables account. Therefore the trial balance will still balance.

    D is correct because the purchases account does appear on the trial balance. The purchases account is a debit balance and if it has been undercast then the debit balance is $100 lower than it should be. This means that the total of the debit balances on the trial balance is $100 too low, and therefore a debit balance is needed on the suspense account.

    All of this is explained in my free lectures on Books of Prime Entry and on Suspense Accounts.

    October 9, 2021 at 11:13 am #637336
    jcafelatte
    Member
    • Topics: 14
    • Replies: 8
    • ☆

    but mr john, can you just explain, when a customer ( eg. A turner) receive money are we supposed to credit or debit his account ? (for A and B)

    October 9, 2021 at 2:08 pm #637346
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51538
    • ☆☆☆☆☆

    We should credit their account. However their accounts are in the receivables ledger and are memorandum only – not part of the double entry. So an error in their account does not affect the suspense account which is all this question is asking about.

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