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ACCA Applied Knowledge · Financial Accounting · Correction of errors

At the year end, Hale Co had a suspense account with a debit balance of $1,200. Investigation showed that the only error was that a purchase of office equipment for $1,200 had been credited to the bank account but no debit entry had been made. What is the correcting journal?

Debit office equipment $1,200 and credit suspense $1,200. The purchase was credited to bank but never debited, leaving suspense with a debit balance. Posting the missing debit to the asset account and crediting suspense removes the balance and records the equipment correctly.

  1. ADebit office equipment $1,200, credit suspense $1,200Correct
  2. BDebit suspense $1,200, credit office equipment $1,200
  3. CDebit office equipment $1,200, credit bank $1,200
  4. DDebit suspense $1,200, credit bank $1,200

Explanation

The missing debit left credits higher than debits, which would normally give a debit balance on suspense of $1,200, matching the data. The missing debit belongs in office equipment. Debit office equipment $1,200 and credit suspense $1,200 clears the suspense balance. Crediting bank again would duplicate the original credit.

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