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CA Foundation · Accounting · Accounting Process

The trial balance of Gupta Stores showed credits exceeding debits by Rs 4,500, and the difference was put to Suspense Account. Later it was found that the purchases book total of Rs 38,000 was carried to the Purchases Account as Rs 33,500. What will be the rectifying entry?

Debit Purchases Account and credit Suspense Account by Rs 4,500. Purchases were under-posted, causing credits to exceed debits; the suspense account carried a debit balance to balance the trial balance, so rectification debits Purchases to correct it and credits Suspense to remove the balance.

  1. ADebit Suspense Account Rs 4,500; Credit Purchases Account Rs 4,500
  2. BDebit Purchases Account Rs 4,500; Credit Suspense Account Rs 4,500Correct
  3. CDebit Purchases Account Rs 38,000; Credit Suspense Account Rs 33,500
  4. DDebit Purchases Account Rs 4,500; Credit Creditors Account Rs 4,500

Explanation

Purchases were understated by Rs 4,500, so the debit side was short. This is why credits exceeded debits by Rs 4,500 and Suspense was debited? No: the shortfall of debit was balanced by putting a debit in Suspense. Hence Suspense carries a debit balance and is cleared by crediting it, while Purchases is debited by Rs 4,500. The option debiting Suspense reverses the entry.

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