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CMA Foundation · Fundamentals of Financial and Cost Accounting · Adjustment Entries and Rectification of Errors

The trial balance of Gupta & Co. showed debits exceeding credits by ₹1,200, which was put in a Suspense Account. Later these were found: (i) a sale of ₹3,000 to Ravi was entered in the Sales Book as ₹300 (posted accordingly to both accounts); (ii) a credit balance of ₹2,100 in the Rent account was omitted from the trial balance; (iii) Discount allowed of ₹600 was posted to the credit of the Discount Received account. What remains in the Suspense Account after correcting the errors that affect it?

Suspense remains with a debit balance of ₹300. The omitted rent credit explains ₹2,100 of debit excess, the wrongly credited discount allowed reduces it by ₹1,200, leaving ₹900 explained against the ₹1,200 transferred. The ₹300 difference stays unexplained.

  1. ADebit balance ₹300
  2. BCredit balance ₹300
  3. CCredit balance ₹1,200
  4. DNilCorrect

Explanation

Item (i) is posted equally to both accounts, so the trial balance is unaffected and Suspense is not involved. Item (ii): omitting a credit balance makes debits exceed credits by ₹2,100, which is the apparent excess. Item (iii): discount allowed should be a debit but was credited, so credits are overstated by 1,200 (2×600), making credits larger and reducing the excess. Net: 2,100 − 1,200 = 900, but the actual excess is 1,200. Therefore the difference is not fully explained; checking: the credit balance of ₹2,100 omitted explains a debit excess of 2,100, the wrongly credited discount makes credits higher by 1,200 so debits excess reduces to 900. The given excess of 1,200 leaves 300 of suspense unexplained. Hence Suspense remains with a debit balance of ₹300.

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