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Answer to Accounting Test Question SP No 1 on Suspense Account
Begin by opening the suspense account. Which side? More debit is needed to balance the trial balance, so debit the suspense account with $56,717.
Then deal with the errors in order:
- Sales returns should have been debited to the sales returns account and they have been credited to the purchases returns account. There are two errors here – the wrong account has been used and an entry which should have been a debit has been entered as a credit. The suspense account entry must therefore be for 2 x $8,980 or $17,960.
- An error of principle -no suspense account entry. Depreciation must be adjusted.
- Items have not been posted, therefore the suspense account is involved.
- Effectively a posting error-the suspense account is again involved.
- A trial balance error must affect the suspense account but no ledger entry.
- This one needs thought. Take it one sentence at a time. Is the suspense account involved? No, because we have an error of commission followed by some unrecorded transactions.
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Part (A)
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Suspense Account
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$
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$
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Difference
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56,717
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Sales returns
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8,980
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Discount received
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919
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Purchases returns
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8,980
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Discount allowed
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836
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Insurance
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580
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Telephone (trial balance)
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38,260
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57,636
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57,636
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Journal entries
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$
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$
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1 Sales returns account
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8,980
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Suspense account
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8,980
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Purchases returns account
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8,980
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Suspense account
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8,980
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2 Plant account
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9,600
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Plant repairs account
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9,600
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Depreciation (profit and loss account)
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960
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Plant depreciation account
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960
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3 Discount allowed account
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836
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Suspense account
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836
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Suspense account
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919
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Discount received account
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919
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4 Insurance account
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580
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Suspense account
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580
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5 Trial balance (no ledger entry)
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38,260
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Suspense account
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38,260
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6 Sales account
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4,800
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Motor vehicles disposal account
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4,800
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Motor vehicles disposal account
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12,000
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Motor vehicles asset account
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12,000
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Motor vehicles depreciation account
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8,000
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Motor vehicles disposal account
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8,000
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Motor vehicles disposal account
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800
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Answer Part (B)
Adjustment to profit
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–
$ |
+
$ |
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Profit as in draft profit and loss account
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141,280
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1 Sales returns adjustment (2 x $8,980)
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17,960
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2 Plant: reduction in repairs
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9,600
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Depreciation-6/12 x 20% x $9,600
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960
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3 Discount allowed
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836
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Discount received
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919
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4 Insurance-opening balance omitted
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580
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5 Telephone expense omitted
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38,260
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6 Profit on sale of car
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800
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Proceeds taken out of sales
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4,800
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63,396
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152,599
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(63,396)
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Revised net profit
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89,203
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