FRA - December 2007 past paper

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)