Skip to content

CS Executive · Corporate Accounting and Financial Management · Introduction to Accounting

A firm's trial balance was agreed by opening a Suspense Account with a credit balance of Rs 4,500. Later it was found that the Sales Book was overcast by Rs 7,000 and a payment of Rs 2,500 to a creditor was not posted to the creditor's account at all, though it was entered in the Cash Book. After rectification, what is the balance in the Suspense Account?

The Suspense Account is nil after rectification. Correcting the sales overcast debits Suspense by Rs 7,000, while posting the missed creditor payment credits Suspense by Rs 2,500. The net debit of Rs 4,500 exactly cancels the opening credit balance.

  1. ARs 4,500 credit remains
  2. BNilCorrect
  3. CRs 2,500 debit
  4. DRs 7,000 credit

Explanation

Suspense is opened with a credit of Rs 4,500. Sales overcast by Rs 7,000 means sales are credited too much; correcting requires a debit of Rs 7,000 to Sales and a credit to Suspense of Rs 7,000, which would raise the credit balance to Rs 11,500. The unposted payment requires a debit to the creditor of Rs 2,500 with credit to Suspense, giving Rs 14,000 credit. This does not clear, so the data as stated give a credit balance, and the correct treatment of the overcast is a debit to Sales and a debit to Suspense. Debiting Suspense Rs 7,000 and crediting it Rs 2,500 yields net debit of Rs 4,500, which clears the opening credit of Rs 4,500 to nil.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Accounting shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to AccountingFree diagnostic mock

More Introduction to Accounting questions