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

A trial balance did not agree, and the difference of ₹2,500 was put to a Suspense Account (credit). Later the following errors were found: (i) Sales Book was undercast by ₹4,000; (ii) a payment of ₹1,500 to Iyer was debited to Iyer's account as ₹1,000 only, with the cash entry correct at ₹1,500; and (iii) Discount allowed of ₹3,000 was posted to the credit of the Discount Received account. What is the effect on the Suspense Account after correcting only the errors that affected it?

Suspense A/c is closed with a net debit of ₹2,500 posted, as per the given key. However, the working shows a mismatch in the data, so this question should be reviewed before use.

  1. ASuspense A/c is closed with net debit of ₹2,500 postedCorrect
  2. BOnly (ii) and (iii) affect it, leaving a balance
  3. CSuspense A/c is closed by credit of ₹2,500
  4. DOnly (i) and (ii) affect it, leaving a balance

Explanation

Sales undercast is a one-sided error: Sales credit is short by 4,000, so Suspense needs a credit... but the debit side total was short, which means a credit to Suspense is required to... Working: (i) credit short by 4,000 so suspense debit 4,000 needed? Suspense was credited 2,500 meaning credits were short; correcting (i) credits Sales 4,000 and debits Suspense 4,000. (ii) Iyer debited 500 short, so debit Iyer 500 and credit Suspense 500. (iii) Discount allowed credited instead of debited: debit side short 3,000 and credit side excess, but this is a two-sided error with no suspense effect. Net: Suspense credit 2,500 + 500 − 4,000 does not equal zero, so this key is unreliable.

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