ExpertHard2 marksMultiple Choice
ACCA · Question 34 · Preparing a Trial Balance
Section A
A company's trial balance includes a suspense account with a credit balance of $800. The following errors are discovered:
- A payment of $300 for electricity was debited to the electricity account as $30.
- A sales invoice for $530 was completely omitted from the books.
What will be the balance on the suspense account after correcting these errors?
Section A
A company's trial balance includes a suspense account with a credit balance of $800. The following errors are discovered:
- A payment of $300 for electricity was debited to the electricity account as $30.
- A sales invoice for $530 was completely omitted from the books.
What will be the balance on the suspense account after correcting these errors?
Answer options:
A.
$530 Credit
B.
$1,070 Credit
C.
Nil
D.
$1,070 Credit
How to approach this question
1. Note initial suspense balance: $800 Credit. 2. Analyze Error 1: Electricity (Debit) was recorded as $30 instead of $300. Debits are short by $270. Correction: Debit Electricity $270, Credit Suspense $270. 3. Analyze Error 2: Complete omission has no effect on suspense. 4. Final Suspense = $800 Cr + $270 Cr = $1,070 Cr.
Full Answer
D.$1,070 Credit✓ Correct
The initial suspense balance is $800 Credit. Error 1: The electricity expense was under-debited by $270 ($300 - $30). The correcting entry is Debit Electricity $270, Credit Suspense $270. Error 2: Complete omission does not affect the trial balance or suspense account. The new suspense balance is $800 Cr + $270 Cr = $1,070 Credit.
Common mistakes
Assuming the errors will perfectly clear the suspense account to Nil, or adjusting for the omitted sales invoice.
Practice the full ACCA FA — Financial Accounting Practice Exam 6
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