Question

Rs. 1,500 being the total of discount column on the credit side of the cash book was not posted in the general ledger. If this error located after preparation of final account then which of the following rectification entry is correct?

• A. Suspense A/c Dr. 1,500
  To Profit & Loss Adj. A/c 1,500
• B. Profit & Loss Adj. A/c Dr. 1,500
  To Suspense A/c 1,500
• C. Discount A/c Dr. 1,500
  To Profit & Loss Adj. A/c 1,500
• D. Profit & Loss Adj. A/c Dr. 1,500
  To Discount A/c 1,500

Answer 1

The correct option is A Suspense A/c Dr. 1,500

To Profit & Loss Adj. A/c 1,500
Profit and loss adjustment A/c is an account prepared to rectify errors after the preparation of final account I.e., profit and loss A/c and balance sheet. Credit balance of discount A/c was not recorded in the books while preparing final account. Therefore, profit and loss adjustment A/c is credited to show the discount A/c and to complete double entry suspense A/c is debited.