Page 40 - DMGT403_ACCOUNTING_FOR_MANAGERS

Unit 2: Recording of Transactions

Suspense account Notes

Sometimes, it is not possible to point out errors easily, then the difference is put to an account,
known as suspense account. Suspense A/c is shown in the trial balance. As and when errors are
located, the same is debited or credited for rectifying the error and the other account which is
credited or debited is the suspense account. Thus, the suspense account is automatically closed.

Example:
Rectify the following errors:
1. A sale of goods to Raja Ram for 2500 was passed through the Purchases Book.

2. Salary 800 paid to Hari Babu was wrongly debited to his Personal Account.
3. Furniture purchased on credit from Mohan Singh for 1000 was entered in the Purchases
Book.

4. 5000 spent on the extension of building was debited to the buildings repairs account.
5. Goods returned by Mani Ram 1200 were entered in Returns Outward Book.
Solution:
Journal Entries to rectify the errors
Dr. Cr.
S. No. Particulars L.F. ( ) ( )
1. Raja Ram Dr. 5,000
To Purchases a/c 2500
To Sales a/c 2500
A sale of goods to Raja Ram through the Purchases book is rectified
2. Salary a/c Dr. 800
To Hari Babu 800
Salary wrongly debited in his personal a/c is rectified.
3. Furniture a/c Dr. 1,000
To Purchases a/c 1000
Furniture purchased was wrongly entered in the Purchases book is
rectified.
4. Buildings a/c Dr. 5,000
To Buildings Repairs a/c 5000
Spent on extension of building was wrongly debited to Building
repairs a/c is rectified.
5. Returns Inward a/c (Sales Returns) Dr.
Returns Outward a/c (Purchases Returns a/c) Dr. 1,200
To Mani Ram 1,200
Goods returned by Mani Ram were entered in returns outward 2400
book.

LOVELY PROFESSIONAL UNIVERSITY 35