ACCA Applied Knowledge · Financial Accounting · Suspense accounts
At 31 December, the trial balance of Kestrel Ltd shows total debits of $482,600 and total credits of $478,100. Investigation shows that a cash sale of $2,250 was correctly debited to the bank account but the credit entry was omitted from the ledger. No other errors exist. What is the effect of correcting this error on the suspense account?
Debits exceed credits by $4,500, so suspense starts with a $4,500 credit. Correcting the omitted $2,250 sales credit means debiting suspense and crediting sales. This leaves a credit balance of $2,250 in suspense, still unexplained and needing further investigation.
- ASuspense is credited with $2,250, leaving a remaining credit difference of $2,250 unexplained
- BSuspense is credited with $2,250, leaving a remaining debit balance of $2,250Correct
- CSuspense is debited with $2,250, leaving a remaining credit balance of $2,250
- DSuspense is debited with $4,500, clearing the balance entirely
Explanation
Debits exceed credits by $4,500, so suspense is opened with a credit of $4,500. Correcting the omitted sales credit of $2,250 means a credit to sales and a debit to suspense, not a credit to suspense. Suspense then stands at a credit of $4,500 less the $2,250 debit, leaving a credit of $2,250. The option with a credit to suspense is wrong because it reverses the direction of the correcting entry.
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