suspense accounts

Your entries (4250 DR and 4000 CR) are the correct entries to clear the balance on the suspense account. When those entries have been made, the balance will be zero.

At the moment, the corrections have not been made, so it must mean that the balance on suspense is currently 250 CR . (To correct afterwards, you would then make your entries which again would then result in a NIL balance).

It should have been credited to the rent receivable account.

So the correcting entry is Dr Rent payable and Cr Rent receivable

(It has no effect on the suspense account)

For rent payable: Cr Cash; Dr Rent payable

For rent receivable: Dr Cash; Cr Rent receivable

(One point that might be confusing is the we use the words ‘rent payable’ to be the rent actually paid (not the rent still owing, despite using the word ‘payable’). Similarly ‘rent receivable’ is used to mean the rent actually received – not the rent still due to us.)

You are welcome 🙂

Accountant discoverex following errors after calculati g errors

A) a non current asset costing 50000 has been included in the purchase account
B) stationery costing 10000 has been included as closing inventory of raw materials instead of stationery expense

What is the effect on gross and net profit
Answer

Understatement of gross profit by 40000 and underst of net profit by 30000

In october 2006 ann sold some goods on sale or return terms for 2500. Their cost to ann was 1500. The transaction has been trated as a credit sale in ann’s finansial statements for the year ended 31 oct 2006. In november 2006 the customer accepted half of the goods and returned the others half in good condition. What adjustements if any shoukd be made to the financial statements.
Answer
Sales and reseivables should be reduced by 2500 $ and closing inventory increased by 1500

Second question:

Non-current assets has been shown as purchases but shouldn’t be in the statement of profit or loss at all.
So gross profit and net profit should both be higher by 50,000.

Inventory of stationary should reduce the stationary expense (below gross profit), not reduce the cost of sales. So gross profit should be reduced by 10,000. Net profit is not affected.

So net effect is gross profit should by higher by 40,000, and net profit should be higher by 50,000.

(You have typed the answer incorrectly)

Fourth question:

As at 31 October they had made no sale, and should not have recorded it as a sale. (it was sale or return, and at 31 October they had not heard from the customer and so at that date they had sold nothing).

So the full amount of the sale needs removing. Also, the full cost of the inventory needs including.

(This is not a suspense account question, so please start a new thread in future rather than have a long list of questions on the same page)

4. The customer didn’t accept the goods until November. So at 31 October, no sale had been made.

5.

Answer A would mean that the debits in the trial balance would be 100 higher than the credits. To make the trial balance balance, we would need a suspense account with a credit balance of 100.

Answer B will mean that the debits in the trial balance would be 100 lower than the credits. So to make it balance we need a suspense account with a debit balance of 100.

You are welcome 🙂

I don’t know where you got this question from, but assuming there was nothing else in the question that you have not typed then neither of them result in a suspense account.

The sales journal and the sales day book are two different names for the same thing – the list of sales on credit.

For both, we take the total from the book and DR Receivables Cr Sales.

If the total is wrong because we have undercast, then the DR and CR will both be of the wrong amount, but because the Dr and Cr will be of the same amount the trial balance will still balance and so a suspense account will not be needed.