Question

Rectify the following errors identified in the books of Shyam. The Trial Balance

showed ₹ 875 as an excess debit.

a. The total of debit side of Expenses account been cast in excess of ₹575.

b. Paid electricity bill of the proprietor’s residence was debited to

Electricity expenses ₹1,050.

c. An amount of ₹ 150 entered in sales return book has been posted to the

debit of Verma, who returned the goods.

Pass journal entries for correcting the above transactions and prepare

Suspense Account.
PLEASE ANSWERRR

Answer 1

Part 1

a

Debit : Suspense Account ₹575

Credit : Expenses ₹575

Reducing the Debit of the Expenses Account by ₹575

b

Debit : Drawings ₹1,050

Credit : Electricity expenses ₹1,050

Drawings treated as Electricity expenses now corrected

c

Debit : Suspense Account ₹ 300

Credit : Account Receivable - Verma ₹ 300

Sales returns posted on wrong side of Verna`s Account now corrected

Part 2

Suspense Account

Debit :

Difference on Trial Balance ₹ 875

Expenses ₹575

Account Receivable - Verma ₹ 300

Totals ₹ 1,750

Credit :

Profit and Loss ₹ 1,750

Totals ₹ 1,750

Step-by-step explanation:

Only errors that affect trial balance totals to not agree will require correction through suspense account.

That said, the errors that do not affect trial balance totals such as Error of Principle, Error of Original Entry do not require to be corrected through the Suspense Account.

The difference in the Suspense Account usually cost more effort to continue to check the records than it is worth it for the firm, hence it is written off to profit and loss account