Remove Suspense account balance

Danielle Milton

Hi all,

I'm getting confused with how to remove the suspense account balance. The question was that the total from the Purchase Day book was counted as £4760 when it was meant to be £5760.

My understanding is that Purchases as typically Dr (like in DR= Purchases, Expenses and Assets while CR = Sales, Income, Capital & Liabilities). However, Control accounts (SLCA and PLCA) do the opposite. So if Purchases = DR then they = DR in the Purchase account but in the PLCA they = CR.

So the incorrect total from the PDB went into the PLCA as a £4760 on the CR side of the account. To fix this we need a £4760 DR to counter balance/correct the incorrect entry. We then need to input a £5760 CR as this is the correct entry/what should have been entered in the 1st place.

That bit I'm ok with. What is causing me a problem is the suspense account and removing the balance. Now the question states a suspense account with a balance of £1000. The PLCA would have been 1000 too small on the CR side of the account and in the total of the PLCA is posted to the CR side of the trail balance. So this means the trial balance would have been £1000 too small on the CR side so the Suspense account balance of £1000 should have been on the CR side of the suspense account as a trial balance error.

So to start with the account has a £1000 CR. We then add in my corrections which is a DR of 4760 and a CR of 5760.

DR = 4760 - reversal of error CR 1000 - Trial balance difference
CR 5760 - Correct entry

Total DR 4760 Total CR 6760.

They say to remove the suspense account I need a £1000 DR but I cannot see how this works. Wouldn't have leave £1000 on the CR side?

Can anyone help please?

stevenhindry

Danielle Milton wrote: »

Hi all,

I'm getting confused with how to remove the suspense account balance. The question was that the total from the Purchase Day book was counted as £4760 when it was meant to be £5760.

My understanding is that Purchases as typically Dr (like in DR= Purchases, Expenses and Assets while CR = Sales, Income, Capital & Liabilities). However, Control accounts (SLCA and PLCA) do the opposite. So if Purchases = DR then they = DR in the Purchase account but in the PLCA they = CR.

So the incorrect total from the PDB went into the PLCA as a £4760 on the CR side of the account. To fix this we need a £4760 DR to counter balance/correct the incorrect entry. We then need to input a £5760 CR as this is the correct entry/what should have been entered in the 1st place.

That bit I'm ok with. What is causing me a problem is the suspense account and removing the balance. Now the question states a suspense account with a balance of £1000. The PLCA would have been 1000 too small on the CR side of the account and in the total of the PLCA is posted to the CR side of the trail balance. So this means the trial balance would have been £1000 too small on the CR side so the Suspense account balance of £1000 should have been on the CR side of the suspense account as a trial balance error.

So to start with the account has a £1000 CR. We then add in my corrections which is a DR of 4760 and a CR of 5760.

DR = 4760 - reversal of error CR 1000 - Trial balance difference
CR 5760 - Correct entry

Total DR 4760 Total CR 6760.

They say to remove the suspense account I need a £1000 DR but I cannot see how this works. Wouldn't have leave £1000 on the CR side?

Can anyone help please?

if your suspense account is a 1000CR
to get rid of it wouldnt you DR suspense with a 1000
then CR PCLA with the 1000 which cancels the suspense
and then brings your PCLA up to the 5760?

RobClarke

Easy way I find to work this out is to write it down in 3 steps.

step 1 being remove incorrect posting
step 2 being to record corrct entry


so Account Debit Credit
1. PLCA 4760
2. PLCA 5760

1. being removal of incorrect entry
2. being entering correct amount
3. will remove suspense - as you want the above to balance you can see by putting 1000 in the debit side it would balance so then it would all look like....

so Account Debit Credit
1. PLCA 4760
2. PLCA 5760
3. Suspense 1000

Hope this helps?

Danielle Milton

I'm afraid I still don't understand. The question stated the Trail balance included a suspense account with a balance of £1000 which I've taken to be on the CR side due to the fact the error was due to the PLCA being £1000 too low.

So we have £1000 CR in the suspense account before we have even looked at the PLCEA. We then correct the error in the PLCEA which leads to a CR of 5760 and a DR of 4760. I'm then being told to put in a DR of 1000.

So the Suspense account ends up with CR 1000+5760 = 6760. Then the DR side is 1000 + 4760 = 5760. They don't balance. The CR side is £1000 too high.

stevef

If the PLCA is £1k too low, there must be a credit in there that shouldn't be, so if there is a rouge £1k credit in the PLCA the suspense account must have a debit of £1k in order to bring calm, balance and joy to the trial balance.

To clear suspense would mean a debit in PLCA and a credit to suspense.

coojee

Danielle Milton wrote: »

I'm afraid I still don't understand. The question stated the Trail balance included a suspense account with a balance of £1000 which I've taken to be on the CR side due to the fact the error was due to the PLCA being £1000 too low.

So we have £1000 CR in the suspense account before we have even looked at the PLCEA. We then correct the error in the PLCEA which leads to a CR of 5760 and a DR of 4760. I'm then being told to put in a DR of 1000.

So the Suspense account ends up with CR 1000+5760 = 6760. Then the DR side is 1000 + 4760 = 5760. They don't balance. The CR side is £1000 too high.

Originally you had a PLCA CR balance of 4760 and a suspense CR balance of 1000. PLCA should have been 5760 so you can CR PLCA with 1000 (so that it becomes 5760) and then DR suspense with 1000 to remove the balance on suspense. It helps to draw up the ledger accounts so that you can actually see what's going on.

The method you're using is correct but it's a more long winded way of doing it, ie removing the incorrect figure and entering the correct figure. if you want to use this method it's fine but then entries will be:

DR PLCA 4760
CR PLCA 5760
DR Suspense 5760
CR Suspense 4760

PLCA is now correct and suspense has a nil balance on it.

What you've said here "So the Suspense account ends up with CR 1000+5760 = 6760. Then the DR side is 1000 + 4760 = 5760. They don't balance. The CR side is £1000 too high" is incorrect as you've credited suspense with 5760 and debited it with 4760. These are the same entries as you made to PLCA and they should be opposite entries. Suspense will be CR 1000 +4760 = 5760 and DR 5760 = 5760