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The trial balance of Gupta Traders did not agree and the difference of Rs 4,200 was placed in a suspense account. Later it was found that a payment of Rs 4,200 to a creditor was debited to the creditor's account but not entered in the cash book. Which statement is correct?

Suspense account has a credit balance of Rs 4,200 and the correction credits cash. The creditor was debited without the matching cash credit, making debits higher, so suspense was credited to balance. Crediting cash and debiting suspense then clears the error.

  1. ASuspense account has a debit balance of Rs 4,200 and the correction credits cash
  2. BSuspense account has a credit balance of Rs 4,200 and the correction credits cashCorrect
  3. CSuspense account has a credit balance of Rs 4,200 and the correction debits cash
  4. DSuspense account has a debit balance of Rs 4,200 and the correction debits cash

Explanation

The creditor was debited but the cash credit was omitted, so debits exceeded credits by 4,200. To balance, the suspense account is placed on the credit side. On discovery, the cash book is credited by 4,200 and the suspense account is debited to close it. A debit suspense balance would arise only if credits exceeded debits.

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