Give the questions and do the journal entries and lastly the suspense

Question

ScanSolve AI Tutor · Accepted Answer

Okay, let's walk through an example of how a suspense account is used to correct errors.

Scenario:

A company's trial balance did not balance at the end of the accounting period. The total of the debit column was $50,000, and the total of the credit column was $49,000. To temporarily balance the trial balance, a Suspense Account was opened with the difference.

Upon investigation, the following errors were discovered:

a) A sales return of $600 was correctly recorded in the Sales Returns Account but was not posted to the Customer's Account.
b) Cash received from a customer, $400, was correctly debited to the Cash Account but was not credited to the Customer's Account.

Initial Suspense Account Balance
The difference in the trial balance is: $\text{Debit Total} - \text{Credit Total} = \$50,000 - \$49,000 = \$1,000$ Since the debit total is greater than the credit total, the Suspense Account must have a credit balance of $1,000 to make the trial balance balance.
Journal Entries to Correct Errors
We will make journal entries to correct each error. Since these errors caused the trial balance imbalance (they are single-sided errors), the Suspense Account will be used to complete the double entry.
- Correction for Error (a): Sales return not posted to Customer's Account.
  
  The Sales Returns Account was correctly debited.
  
  The Customer's Account (an asset) should have been credited by $600 to reduce the amount owed by the customer. Since this credit was omitted, the credit side of the trial balance was understated by $600.
  
  To correct this, we credit the Customer's Account. The balancing debit will go to the Suspense Account.
  
  $\begin{array}{|l|l|r|r|} \hline \textbf{Date} & \textbf{Particulars} & \textbf{Debit (\$)} & \textbf{Credit (\$)} \\ \hline \text{X} & \text{Suspense Account} & 600 & \\ & \quad \text{To Customer's Account} & & 600 \\ & \text{(To correct omission of credit to customer for sales return)} & & \\ \hline \end{array}$
- Correction for Error (b): Cash received not credited to Customer's Account.
  
  The Cash Account was correctly debited.
  
  The Customer's Account (an asset) should have been credited by $400 to reduce the amount owed by the customer. Since this credit was omitted, the credit side of the trial balance was understated by $400.
  
  To correct this, we credit the Customer's Account. The balancing debit will go to the Suspense Account.
  
  $\begin{array}{|l|l|r|r|} \hline \textbf{Date} & \textbf{Particulars} & \textbf{Debit (\$)} & \textbf{Credit (\$)} \\ \hline \text{X} & \text{Suspense Account} & 400 & \\ & \quad \text{To Customer's Account} & & 400 \\ & \text{(To correct omission of credit to customer for cash received)} & & \\ \hline \end{array}$
Suspense Account Ledger
Now, let's see how these corrections affect the Suspense Account.
$\begin{array}{c} \textbf{Suspense Account} \\ \begin{array}{l|l r | l | l r} \hline \textbf{Date} & \textbf{Particulars} & \textbf{Amount (\$)} & \textbf{Date} & \textbf{Particulars} & \textbf{Amount (\$)} \\ \hline \text{X} & \text{Customer's A/c (Error a)} & 600 & \text{X} & \text{Balance b/d} & 1,000 \\ \text{X} & \text{Customer's A/c (Error b)} & 400 & & & \\ \hline & \textbf{Total} & \textbf{1,000} & & \textbf{Total} & \textbf{1,000} \\ \hline \end{array} \end{array}$
After posting the correcting entries, the Suspense Account now has equal debits and credits, meaning its balance is \boxed{\text{\0}}$. This indicates that all errors causing the initial trial balance imbalance have been identified and corrected.

Give the questions and do the journal entries and lastly the suspense

Step-by-step solution

Initial Suspense Account Balance

Journal Entries to Correct Errors

Suspense Account Ledger

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