SUSPENSE ACCOUNT

1) The sale of a machine $300 is entered in Sales account instead of a Machinery disposal account.
This is an example of

(A) Complete reversal of entry

(B) Error of principle
(C) Error of original entry
(D) Error of commission

2) Error which affects one account, can be

(A) Error of commission

(B) Error of posting
(C) Error of principle
(D) Error of original entry

3) $5 has been taken to the debit of the account of T. Lim instead of to the debit of L. Ong The trail
Balance as a result would

(A) Still agree

(B) Disagree
(C) Be overstated
(D) Be understated

4) Mr. Lims closing Stock had been undervalued by $200. Which of the following would be the
journal entry to correct the mistake?

$ $
(A) Stock 200
Suspense account 200
(B) Suspense account 200
Stock 200
(C) Stock 200
Trading account 200
(D) Trading account 200
Stock 200
5) Given net profile as per draft accounts $1700, sales understated $170 profit on machine disposal
$600 not recorded rent received treated as an expense $1900 and rates expense understated
$150, the adjusted net profit will be

(A) $5 550
(B) $6 000
(C) $6 120
(D) $7 120

6) After preparing the trail balance, it was found that debtors totaling $2 000 were overstated and
Rent received was understated by $500. A suspense account is opened to complete the trail
balance. What is the balance on suspense account?

(A) $ 1 500 DR
(B) $ 1 500 CR
(C) $ 2 500 DR
(D) $ 2 500 CR

7) If sales return of $1 000 were incorrectly included in sales. Gross profit would be

(A) Overstated by $1 000

(B) Understated by $1 000
(C) Overstated by $2 000
(D) Understated by $2 000

8) Which of the following error would not cause a trial balance difference?

(A) Cash sales $100 recorded as debit sales account $100, credit cash amount $100
(B) An expense account incorrectly balanced off
(C) Purchase of goods from K. khan $730 recorded in the purchase ledger account only
(D) Debtor balance of $500 omitted from trail balance

9) A trial balance will not disclose an error, which involves

(A) Debiting an expense item to a prepaid expense account

(B) Posting a credit entry in the general journal to the debit side of the account in the ledger
(C) Extracting an account balance wrongly from the ledger
(D) Omitting an item when casting the debit column of the trail balance

10) Which adjustment will result in an increase in a companys stated profit?

(A) The amortization of goodwill

(B) The application of reserves for the issues of bonus shares
(C) The capitalization of development costs
(D) The upward revaluation of fixed assets
11) A trail balance fails to agree. The debit exceeds the credits
Which single error in the nominal ledger would cause the difference?

(A) A contra between the debtors and creditors ledgers has been entered on the credit side of
both control accounts
(B) A rental receipt has been entered twice in the rent receivable account
(C) The closing stock for the previous period has not been entered in the stock account
(D) The opening electricity accrual has been brought forward on the wrong side of the ledger
account

12) Sales returns of $400 have been credited to the debtors account as $40. A suspense account is
created to complete the trail balance. What is the balance on the Suspense Account?

(A) $40 DR
(B) $40 CR
(C) $360 DR
(D) $360 CR

13) The directors of a company are finishing the accounts for the year ended 30 June 1997. They
discover that the stock at 1 July 1996 was over-valued by $50 000.
What is the effect of correcting this error in the accounts?

Net profit Reserves b/f

For year-end 30 June 1997 At 1 July 1996
(A) Decrease Decrease
(B) Decrease Increase
(C) Increase Decrease
(D) Increase Increase

14) A company discovers that its opening stock was over-valued by $30 000
This amount is considered to be significant
Which effects will the correction of this error have on the financial statements for the year?

Net Profit Retained profit brought Closing Stock

forward
(A) - $30 000 - $30 000 Nil
(B) Nil - $30 000 - $30 000
(C) + $30 000 - $30 000 Nil
(D) + $30 000 - $30 000 - $30 000
15) A Companys trail balance shows debit balances in excess of credit balances by $1 000.
What could explain this?

(A) Cash overstated by $540

Omission of the telephone account totaling $460
(B) Creditors control account overstated by $450
Debtors control account understated by $550
(C) Omission of accumulated depreciation of $500
Sales understated by $500
(D) Purchases understated by $500 in the nominal ledger
Omission of sales invoices totaling $500

16) When preparing the final accounts for the year; the following errors are discovered.
1. Sales day book was understated by $300
2. No provision had been made for accrued overtime costs, $200
3. No account had been taken of prepaid rent, $400
The draft net figure is $8 050.
What will be the net profit when the errors are connected?
(A) $8 150
(B) $8 550
(C) $8 750
(D) $8 950

17) An electricity accrual of $375 was treated as a prepayment in preparing a traders Profit & Loss
account.
What was the effect on Profit?

(A) Overstated by $375

(B) Overstated by $750
(C) Understated by $375
(D) Understated by $750

18) Motor vehicles purchased for $530 000 at the start of the year have been incorrectly
depreciated for the whole year using the straight line method at 10% instead of 25%
Ledger balances after the entries have been posted:

Motor vehicles $530 000

Provision for depreciation $53 000

Which entries will correct the error?

(A) Debit profit & loss $79 500; credit provision for depreciation of motor vehicles $79 500
(B) Debit profit & loss $132 500; credit provision for depreciation of motor vehicles $132 500
(C) Debit provision for depreciation of motor vehicles $79 500; credit profit & loss $79 500
(D) Debit provision for depreciation of motor vehicles $132 500; credit profit & loss $132 500
19) A trail balance failed to agree and the difference was entered in a Suspense Account. A credit
balance of $1 530 in the Sales Ledger had been wrongly extracted as a debit balance.
Which journal entry will correct this error?

Debit Credit
(A) Suspense $3 060
(B) Suspense $1 530 Sales S1 530
(C) Suspense $3 060 Sales $3 060
(D) Sales $3 060 Suspense $3 060

20) An extract from a trail balance is shown.

Debit ($) Credit ($)

Trade debtors 2 700 000
Provision for doubtful debts 135 000
Finished goods stock 3 500 000

The following adjustments are needed:

The provision for doubtful debts is to be 4% of book value of debtors.
Finished goods stock costing $50 000 is found to be un-saleable.
What is the effect of these changes on the net profit?

(A) Decrease by $23 000

(B) Increase by $23 000
(C) Decrease by $77 000
(D) Increase by $77 000

21) The difference on a trail balance is entered in a suspense account. It is discovered that a
discount received has been debited to the discount allowed account.
Which journal entry corrects the error?

(A) DR Discount received Amount

CR suspense account

(B) DR Suspense account

CR Discount allowed account

(C) DR Discount allowed account

DR Discount received account
CR Suspense account

(D) DR Suspense account

CR Discount allowed account
CR Discount Received account
22) A companys account showed a gross profit of $84 200. It was found that the opening stock had
been overstated by $4 200 and that the closing stock had been understated by $3 700.
What is the corrected gross profit?
(A) $78 300
(B) $83 800
(C) $84 700
(D) $92 100

23) The difference on a trial balance has been entered in a suspense account. A receipt of $5 000
from a debtor has been debited to the bank account and credited to the sales account.
Which journal entry is necessary to correct the error?

Debit Credit
(A) Sales account $5 000 Suspense account $5 000
(B) Sales account $5 000 Debtors account $5 000
(C) Suspense account $10 000 Bank account $10 000
(D) Suspense account $5 000 Bank account $5 000

24) After draft account had been prepared, the following errors were discovered.
Opening stock was overvalued by $2 000
Closing stock was undervalued by $3 000
If the original gross profit was $90 000, what was the gross profit after the errors were
corrected?
(A) $85 000
(B) $89 000
(C) $91 000
(D) $95 000

25) The draft account of a business shows a net profit of $64 000 before taking account of the
following.
1. The reduction of the provision for doubtful debts by $300
2. The purchase of office stationary costing $2 400 which has not been entered in the
records; only one sixth of this stationary was used by the year-end.
What is the corrected net profit?
(A) $64 300
(B) $64 100
(C) $63 900
(D) $61 900
26) The final account of John Gates contain two errors. The closing in trade has been overvalued by
$6 000 and an uninsured theft off stock costing $9 000 has not been taken into account.
What effects will correction of these errors have on John Gates accounts?

Gross Profit Net Profit

(A) Reduced by $6 000 Increased by $3 000
(B) Reduced by $3 000 Reduced by $3 000
(C) Increased by $3 000 Reduced by $6 000
(D) Increased by $6 000 Increased by $6 000

27) A trail balance has been prepared. It does not balance so a suspense is opened. Later several
errors are found. One involves the Rent Payable Account when $234 paid in advance from the
previous year has been brought forward at the start of the current year on the wrong side of the
account and as $324.
Which journal entry will correct the situation?

Debit Credit
(A) Rent payable $90 Suspense $90
(B) Suspense $90 Rent payable $90
(C) Suspense $558 Rent payable $558
(D) Rent payable $558 Suspense $558

28) The trail balance of a business does not agree. The difference has been entered in a suspense
account. The error was caused by a cheque for $400 from Omar being debited to Omars
account.
What is the journal entry to correct this?

Debit Credit with

(A) Bank account Suspense account $400
(B) Suspense account Omars account $400
(C) Suspense account Omars account $800
(D) Suspense account Bank account $800

29) A transport business owned by a sole proprietor purchases a motor vehicle. This is charged to
the motor vehicles Running cost account.
What are the effects of this on the end-of-year Balance Sheet?

(A) Fixed assets understated Current assets understated

(B) Fixed assets overstated Current assets overstated
(C) Fixed assets overstated Capital account overstated
(D) Fixed assets understated Capital account understated
30) A companys account showed a gross profit for the year of $32 500. After the accounts were
prepared it was found that the opening stock had been overstated by $2 400 and the closing
stock had been understated by $3 400.
What is the corrected gross profit of the year?

(A) $26 700

(B) $31 500
(C) $33 500
(D) $38 300

31) A trial balance does not balance and suspense account is opened.
Subsequently the following errors are found and the suspense account is cleared
1. A sales invoice for $1 240 had been omitted from the books.
2. Rent paid of $2 600 was entered correctly in the cash book but incorrectly as $6 200 in
the Rent account.
3. The purchases journal was under cast by $1 980
What was the original balance on the suspense account?
(A) $1 620 credit
(B) $4 340 debit
(C) $5 580 credit
(D) $5 580 debit

32) Which of the following would prevent a trial balance from balancing?

(A) A credit note from a supplier entered in the sales journal

(B) A discount allowed posted to the discount received account
(C) An invoice entered twice in the sales journal
(D) A refund to a customer wrongly posted to discounts allowed account.

33) A business omitted discounts allowed of $700 from its trial balance. During the year a machine
had been sold for cash of $500 but the only accounting entry made was a debit in the Bank
account.
What is the balance on the Suspense account?

(A) $200 debit

(B) $1 200 debit
(C) $200 credit
(D) $1 200 credit

34) A business has a draft net profit of $84 000. It is discovered that the closing stock was
overvalued by $4 000 and that discounts received of $1 500 were treated as an expense.
What is the corrected net profit?

(A) $81 500

(B) $83 000
(C) $89 500
 (D) $91 000
35) Which of the following will increase profit?

(A) Increasing depreciation rates

(B) Increasing distributable reserves
(C) Increasing the provision for the doubtful debts
(D) Increasing the value of closing work-in-progress

36) A trial balance does not balance. The difference has been entered in a Suspense account.
The following errors are found.

1. The purchase ledger control account balance $48 300 has

been included as a debit balance.
2. Provision for depreciation has been overcast by $960
3. A cash payment of $630 for rent has been credited in the
Cash book and debited to the Bad Debts account

What is the correcting debit entry to the Suspense account?

(A) $47 340

(B) $95 010
(C) $95 640
(D) $97 560

37) A companys trial balance includes a suspense account. It was found that the only errors were
discounts received of $240 and discounts allowed of $312, which had both been entered on the
incorrect sides of the respective ledger accounts.
What is the double entry required to clear the Suspense account balance?

Account DR ($) CR ($)

Discounts Allowed 312
(A) Discounts Received 240
Suspense 72
Discounts Received 240
(B) Suspense 72
Discounts Allowed 312
Discounts Allowed 624
(C) Discounts Allowed 480
Suspense 144
Discounts Received 480
(D) Suspense 144
Discounts Allowed 624
38) A suspense account has a balance pf $450 debit.
What has caused this balance in the Suspense account?

(A) Motor expenses of $225, correctly entered in the cash book, and posted to motor expenses
as a credit.
(B) Motor expenses of $225, entered in the cash book as a receipt and posted to motor
expenses as a credit.
(C) Motor expenses of $450 correctly entered in the cash book, and posted to motor vehicles as
a debit.
(D) Motor expenses of $675, entered in the cash book as a credit of $225 and posted to motor
expenses as $225 debit

39) The wages of staff employed in getting goods into a saleable condition have been debited in the
Profit and Loss account.
What is the effect of this error?