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FRA - December 2007 past paper

Jonno1Jonno1 Feels At HomeRegistered Posts: 63
I'm busy working through this past paper. I have to prepare a journal entry for the following correction to be made:

Accrued advertising expenses of £1,500 were debited to the advertising expenses account twice. No other entries were made.

I can understand why the advertising expenses account needs to be credited by £1,500 and the suspense account debited by £1,500. However looking at the answers, the accruals account then needs to be credited by £1,500 and the suspense account debited by £1,500. Why the credit to the accruals account?

Jonno1

Comments

  • sdvsdv Experienced Mentor Registered Posts: 585
    Jonno1 wrote: »

    Accrued advertising expenses of £1,500 were debited to the advertising expenses account twice. No other entries were made.

    Normaly you would expect to Debit advertising £1500 and credit Accruals £1500

    But in the aboue error the advertising a/c has been debited by £3000 therefore a suspense a/c need to be credited by £3000

    Jonno1 wrote: »

    I can understand why the advertising expenses account needs to be credited by £1,500 and the suspense account debited by £1,500. However looking at the answers, the accruals account then needs to be credited by £1,500 and the suspense account debited by £1,500. Why the credit to the accruals account?

    to correct the error Reduce teh adverting a/c by £1500

    Debit suspense a/c by £1500 ( this will now leave a £1500 credit bal in suspense)
    Credit Advertising a/c by £1500 - (advertising a/c is now correct)

    Now clear the suspense a/c and post the correct balance in the accruals a/c

    Debit suspense a/c £1500
    Credit Accruals a/c £1500 (credit accruals because these are unpaid expenses for the current accounting period)
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