ACCA Applied Knowledge · Financial Accounting · Suspense accounts
Orion Ltd's trial balance has a credit suspense balance of $2,700. Three errors are found: (1) a cash sale of $1,500 was debited to the bank account but no credit entry was made; (2) the purchase of office equipment for $4,000 was recorded by debiting the purchases account and crediting payables; (3) a payment of $1,200 to a supplier was credited to bank and no debit entry was made. After correcting all three, what is the remaining balance on the suspense account?
The question data are inconsistent, so this item should not be used.
- ACredit $1,200 remaining
- BNilCorrect
- CDebit $1,200 remaining
- DCredit $2,700 remaining
Explanation
Error 1: debit bank only, so credits were short by $1,500; correcting with a credit to sales and a debit to suspense clears $1,500. Error 2 is a principle error and does not affect suspense. Error 3: credit bank only, so debits were short by $1,200; correcting with a debit to payables and a credit to suspense. Net effect on suspense: debit $1,500 and credit $1,200 gives net debit $300. Using the opening credit of $2,700: the opening credit suspense was created from an imbalance of $300 only, meaning the question data is inconsistent.
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More Suspense accounts questions
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