ACCA F3 MCQ Suspense Account
Fred's trial balance did not balance so he opened a suspense account with a debit balance of $50. Control accounts are maintained for receivables and payables.
Fred discovered the following:
1. The sales day book was undercast by $6,000.
2. Purchases of $570 from the purchases day book have only been recorded in the payables ledger control account.
3. Profit on sale of non-current assets of $300 had been recorded in the sundry income account as $380.
What is the remaining balance on Fred's suspense account after these errors have been corrected?
| A. | 600 |
| B. | -5,400 |
| C. | 6,650 |
| D. | 6,540 |
| Answer. | A. |
| + means Debit | - means Credit |
Examiner's comment:
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The key in dealing with the correction of suspense accounts is to establish whether an error requires an entry in the suspense account in the first place. This will only happen if the original entry was one-sided, i.e. only had a debit and no credit or vice versa. This means that the correction of the entry would be to debit or credit the missing account and the balancing entry posted to the suspense account to clear it.
Option 1 does not require adjustment in the suspense account, as the total of the sales day book is posted into the receivables control account and to the sales account. If the total is incorrect, that incorrect figure forms part of the double entry and both accounts are incorrect, but it would not cause the trial balance to be out of balance.
Option 2 does affect the suspense account as there has been a one-sided entry in the accounts. It may help to consider the original double entry, Dr -, Cr Payables control. This will cause the trial balance to be out of balance as there is a missing debit entry. To correct this, the journal is Dr 570 which corrects the original posting and Cr Suspense account $570
Option 3 also affects the suspense account as there has been an incorrect posting. Usually, the journal entry on the disposal of an asset is to Dr Cash with the proceeds, Cr Non-current assets to remove it from the accounts and Cr Profit.
However, in this case too much profit has been recorded so the journal would be out of balance and would affect the suspense account. The correcting journal is to remove the profit by Dr Sundry income $80 and Cr Suspense $80.
If these journals are entered into the suspense account, the closing balance is $ 600 as shown below.
| b/f | 50 | Purchases | 570 |
| c/f | 600 | Sundry Income | 80 |
| Total | 650 | 650 |
The most common incorrect answer was B, where every error given was put into the suspense account
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