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ACCA Applied Knowledge · Financial Accounting · General ledger accounts and journal entries

Ashby Ltd bought a machine for $20,000 and paid cash. The bookkeeper recorded Dr Machinery $2,000 and Cr Cash $20,000, and the difference was posted to suspense. What is the journal to clear suspense?

Debit machinery $18,000 and credit suspense $18,000. Machinery was recorded at $2,000 instead of $20,000, so the $18,000 shortfall in debits was parked in suspense as a debit, which is cleared by this credit.

  1. ADr Machinery $18,000; Cr Suspense $18,000Correct
  2. BDr Suspense $18,000; Cr Machinery $18,000
  3. CDr Machinery $20,000; Cr Suspense $20,000
  4. DDr Suspense $2,000; Cr Machinery $2,000

Explanation

Debits were $2,000 against credits of $20,000, so suspense was debited $18,000. Machinery needs a further debit of $18,000 to reach $20,000, and suspense is credited $18,000 to clear it. Option B reverses this.

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