Question

An accountant, while balancing his books found that there was a difference of Rs. 85.95 in the trial balance. Being required to prepare the final accounts, he placed this difference to a newly opened suspense account which was carried forward to the next year, when the follwing errors were discovered.

(i) Goods bought from a merchant for Rs. 5.50 had been posted to the credit of his account as Rs. 55.

(ii) An item of Rs. 10.62 entered in the sales return book had been posted to the debit of the customer who returned the goods.

(iii) Rs. 60 owing by a customer had been omitted from the schedule of sundry debtors.

(iv) Rs. 2.31 discount received from a creditor had been duly entered in his account but not posted to discount received account.

Give journal entries necessary to correct these errors and prepare the suspense account.

Answer 1

Rectification entries in Journal

$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{LF}& \text{Amt(Dr)}& \text{Amt(Cr)}\\ \text{(i)}& \text{Merchant A/c}\text{Dr}& & \text{49.50}& \\ & \text{To Suspense A/c}& & & \text{49.50}\\ & \text{(Excess amount posted to the credit}& & & \\ & \underset{–}{\text{of a merchant account)}}& & & \\ \text{(ii)}& \text{Suspense A/c}\text{Dr}& & \text{21.24}& \\ & \text{To Customer A/c}& & & \text{21.24}\\ & \text{(Amount wrongly debited instead}& & & \\ & \underset{–}{\text{of being credited in the customer account})}& & & \\ \text{(iii)}& \text{Sundry Debtors A/c}\text{Dr}& & \text{60.00}& \\ & \text{To Suspense A/c}& & & \text{60.00}\\ & \text{(Customer's account not recorded in}& & & \\ & \underset{–}{\text{the list of sundry debtors)}}& & & \\ \text{(iv)}& \text{Suspense A/c}\text{Dr}& & \text{2.31}& \\ & \text{To Discount Received A/c}& & & \text{2.31}\\ & \text{(Discount received not posted to}& & & \\ & \text{the credit of discount received account})& & & \end{array}$
Suspense A/c

$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt(Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt(Rs.)}\\ & \text{Balance b/d}& & \text{85.95}& & \text{Merchant A/c}& & \text{49.50}\\ & \text{Customer A/c}& & \text{21.24}& & \text{Sundry Debtors A/c}& & \text{60.00}\\ & \text{Discount Received A/c}& & \text{2.31}& & & & \\ & & & \overline{\underset{–}{109.50}}& & & & \overline{\underset{–}{109.50}}\end{array}$

Note: After passing all the rectifying entries, it is ascertained that the credit side of the suspense account exceeds the debit by Rs. 85.95. As such it will be treated as the opening balance of suspense account and will be written on the debit side.