ExpertMedium2 marksMultiple Choice
ACCA · Question 20 · Suspense Accounts and Errors
A bookkeeper extracted a trial balance that failed to agree. The debits exceeded the credits by $4,500, so a suspense account was opened. It was later discovered that a cash receipt of $4,500 from a credit customer was correctly entered in the cash book but completely omitted from the receivables ledger. What journal entry is required to correct this error and clear the suspense account?
A bookkeeper extracted a trial balance that failed to agree. The debits exceeded the credits by $4,500, so a suspense account was opened. It was later discovered that a cash receipt of $4,500 from a credit customer was correctly entered in the cash book but completely omitted from the receivables ledger. What journal entry is required to correct this error and clear the suspense account?
Answer options:
A.
Debit Receivables $4,500; Credit Suspense Account $4,500
B.
Debit Suspense Account $4,500; Credit Receivables $4,500
C.
Debit Cash $4,500; Credit Receivables $4,500
D.
Debit Suspense Account $9,000; Credit Receivables $9,000
How to approach this question
Determine what the entry *should* have been, what it *was*, and create the correction. The cash book was debited, but no credit was made. So, make the missing credit to Receivables and debit Suspense.
Full Answer
B.Debit Suspense Account $4,500; Credit Receivables $4,500✓ Correct
The correct entry for a cash receipt is Dr Cash, Cr Receivables. The bookkeeper did Dr Cash $4,500, but made no credit entry. This caused debits to exceed credits by $4,500, creating a credit balance in the suspense account. To fix the error, we must record the missing credit: Cr Receivables $4,500. The corresponding debit clears the suspense account: Dr Suspense $4,500.
Common mistakes
Debiting receivables (thinking a receipt increases the account) or doubling the amount (confusing an omission with a reversal).
Practice the full ACCA FA — Financial Accounting Practice Exam 3
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