Question
What do you mean by Suspense Account? When is it opened?
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Answer
Suspense Account: Suspense Account is the account to which the amount being the difference in trial balance is temporarily placed. If the total of debit side is short, Suspense Account will show debit balance. And if, the total of credit side is short, Suspense Account will show credit balance. The difference is placed in the Suspense Account so that final accounts are prepared without delay. As a result of this, Trial Balance will appear to agree.. However, the errors still remain in the Trial Balance which are identified and rectified.
Suspense Account is used for rectifying all One-Sided Errors: It is opened Due to errors any error in journal entries especially one-sided errors, There may be cases when Trial balance does not match i.e when the total of the debit column does not match that of the credit column, then the difference of the Trial Balance is transferred to a temporary account in order to avoid delay in preparation of the financial statements. This temporary account is termed as Suspense Account and it is prepared only in case of one-sided errors in the books of accounts.
Suspense Account is used for rectifying all One-Sided Errors: It is opened Due to errors any error in journal entries especially one-sided errors, There may be cases when Trial balance does not match i.e when the total of the debit column does not match that of the credit column, then the difference of the Trial Balance is transferred to a temporary account in order to avoid delay in preparation of the financial statements. This temporary account is termed as Suspense Account and it is prepared only in case of one-sided errors in the books of accounts.
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From the following balances extracted from the Ledger of Sri Narugopal, prepare Trial Balance as on 31st March, 2019:
On 17th April, 2016, X sold goods to Y for ₹ 80,000 and draws a bill for 2 months upon Y for the amount due. Y accepted the bill and returned it to X. On due date the bill became dishonoured and X paid ₹ 400 as Noting Charges. Fifteen days later Y pays the amount due to X. Pass Journal entries in the books of both the parties.
Narayanan purchased goods for ₹ 25,000 from Ravinderan on Feb. 01, 2016. Ravinderan drew upon Narayanan a bill of exchange for the same amount payable after 30 days. On the due date Narayanan dishonoured his acceptance. Record the necessary journal entries in the books of Ravinderan and Narayanan in following cases:
- When the bill was retained by Ravinderan with him till the date of its maturity.
- When the bill was discounted by Ravinderan immediately with his bank @ 6% p.a.
- When the bill was endorsed to his creditor Ganeshan.
- When the bill was sent by Ravinderan to his bank for collection a few days before it maturity.
Classify the following accounts under personal, real or nominal accounts:
- Commission Paid.
- Commission Received.
- Commission Accrued.
- Prepaid Salaries.
- Leasehold Property A/c.
- Discount Allowed.
- Carriage Inwards A/c.
- Life Insurance Corporation of India.
- Drawings A/c.
- Rent Received in Advance.
- Debtors.
- Sales A/c.
- Rent Paid in Advance.
- Bank Overdraft.
Prepare double column cash book from the following transactions for the year August 2017:
|
|
₹
|
|
|
01
|
Cash in hand
|
17,500
|
|
|
Cash at bank
|
5,000
|
|
03
|
Purchased goods for cash
|
3,000
|
|
05
|
Received cheque from Jasmeet
|
10,000
|
|
08
|
Sold goods for cash
|
7,000
|
|
10
|
Jasmeet’s cheque deposited into bank
|
|
|
12
|
Purchased goods and paid by cheque
|
20,000
|
|
15
|
Paid establishment expenses through bank
|
1,000
|
|
18
|
Cash sales
|
7,000
|
|
20
|
Deposited into bank
|
10,000
|
|
24
|
Paid trade expenses
|
500
|
|
72
|
Received commission by cheque
|
6,000
|
|
29
|
Paid Rent
|
2,000
|
|
30
|
Withdrew cash for personal use
|
1,200
|
|
31
|
Salary paid
|
6,000
|
Prepare a Cash Book with Cash and Bank Columns from the following particulars:
|
2017
|
|
(₹)
|
|
Feb. 1
|
Cash in Hand ₹ 14,800; Bank Overdraft ₹ 32,700
|
|
|
Feb. 4
|
Sold goods, received cheque (deposited same day)
|
4950
|
|
Feb. 5
|
Sold goods to Navin on Credit
|
10,000
|
|
Feb. 8
|
Received from Navin a cheque for ₹ 9,500 in settlement of his account.
|
|
|
Feb. 10
|
Sold goods to Murlidhar on Credit
|
6,000
|
|
Feb. 12
|
Cheque received from Navin endorsed to Praveen in full settlement of his account
|
9,800
|
|
Feb. 15
|
Received cheque from Ram
|
12,800
|
|
Allowed him discount
|
200
|
|
|
Feb. 16
|
Paid into Bank (including Ram's cheque)
|
15,000
|
|
Feb. 18
|
Cheque from Ram returned dishonoured and bank debits our account in respect of charges on this cheque ₹ 20. Discount not withdrawn.
|
|
|
Feb. 19
|
Received the amount of returned cheque and bank charges in cash from Ram.
|
|
|
Feb. 20
|
Instructed the bank to issue a bank draft for ₹ 5,000 in favour of Shyam. Bank charged ₹ 40 for issuing the draft.
|
|
|
Feb. 22
|
Murlidhar settled his account by means of a cheque for ₹ 6,200; including ₹ 200 as the interest charged from him. Lodged the cheque into bank.
|
|
|
Feb. 24
|
Paid ₹ 5,000 by cheque for cash purchases.
|
|
|
Feb. 25
|
Sudhir who owed us ₹ 8,000 became bankrupt and paid us 50 paise per rupee.
|
|
|
Feb. 28
|
Paid salary to Manohar Lal
|
3,000
|
|
Feb. 28
|
Banked
|
20,000
|
M/s Lokesh Fabrics purchased a Textile Machine on April 01, 2011 for ₹ 1,00,000. On July 01, 2012 another machine costing ₹ 2,50,000 was purchased . The machine purchased on April 01, 2011 was sold for ₹ 25,000 on October 01, 2015. The company charges depreciation @15% p.a. on straight line method. Prepare machinery account and machinery disposal account for the year ended March 31, 2016.
A firm purchased on 1st April, 2009, a second-hand Machinery for ₹ 36,000 and spent ₹ 4,000 on its installation. On 1st Oct. in the same year another Machinery costing ₹ 20,000 was purchased. On 1st Oct., 2011, the Machinery bought on 1st April, 2009 was sold off for ₹ 12,000 and on the same date a fresh Machine was purchased for ₹ 64,000. Depreciation is provided annually on 31st March, @ 10% p.a. on the Written Down Value Method. Show the Machine A/c from 1st April, 2009 to 31st March, 2013.
Bansal Traders allow a trade discount of 10% on the list price of the goods purchased from them. Mohan traders, who runs a retail shop made the following purchases from Bansal Traders.
|
Date
|
Amount
₹
|
|
Dec. 21, 2016
|
1,000
|
|
Dec. 26, 2016
|
1,200
|
|
Dec. 18, 2016
|
2,000
|
|
Dec. 31, 2016
|
5,000
|
For all the purchases Mohan Traders drew promissory note in favour of Bansal Traders payable after 30 days. The promissory note for the sale of Dec. 21, 2016 was retained by Bansal Traders with them till the date of its maturity. The promissory note drawn on 26.12.2016 was discounted by Bansal Traders from their bank at 12% p.a. The promissory note drawn on Dec. 28, 2016 was endorsed by Bansal Traders in favour of their creditor Dream Soaps in full settlement of a purchase amounting to ₹ 1,900. On 25.1.2017 Bansal Traders sent the promissory note drawn on Dec. 31, 2016 to their bank for collection. All the promissory notes were met by Mohan Traders. Record the necessary journal entries for the above transactions in the books of Bansal Traders and Mohan Traders and prepare Mohan Traders account in the books of Bansal Traders and Bansal Traders account in the books of Mohan Traders.
From the following particulars, prepare a Bank Reconciliation Statement of Alpha Electronic Motor. Private Ltd. as on 30th September, 2014:
- Overdraft on 30th September 2014 as per Pass Book ₹ 10,000.
- Cheque deposited in the bank but not recorded in Cash Book ₹ 100.
- Cheque received and recorded in the Cash Book but not sent to bank for collection ₹ 1,000.
- Several cheques were drawn in the last week of September, totalling ₹ 15,000; of these cheques totalling only ₹ 9,000 were cashed before 30th September.
- Similarly, several cheques, totaling ₹ 9,000 were sent for collection; of these cheques of the value of ₹ 1,500 were credited on 5th October and ₹ 2,000 on 7th October, balance being credited before 30th September.
- Fees of ₹ 250 was paid directly by the bank but was not recorded in the Cash Book.
- In the Cash Book, a bank charge of ₹ 30 was recorded twice while another bank charge of ₹ 50 was not recorded at all.
- Interest of ₹ 1,400 was charged by the bank but was not recorded in the Cash Book.