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ACCA Applied Knowledge · Financial Accounting · Suspense accounts

A bookkeeper transposed digits when posting a $7,200 purchase invoice, entering $2,700 in the payables ledger and the correct figure of $7,200 to the purchases account. The trial balance is drawn up before any other errors are found. What is the effect on the trial balance?

Credits are understated by $4,500. The purchases debit is the correct $7,200, but the payables credit was entered as $2,700 through transposed digits, so the credit side falls short by the $4,500 difference.

  1. ACredits are understated by $4,500Correct
  2. BDebits are understated by $4,500
  3. CDebits are overstated by $9,900
  4. DThe trial balance still balances

Explanation

Purchases is debited with $7,200 but payables is credited with only $2,700. Debits therefore exceed credits by $4,500, which means credits are understated by $4,500. A suspense account credit is not needed because it would need a debit to clear: the correction is to credit payables $4,500.

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