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Objective Assessment on Suspense Accounts

by Ken Delaney-Moore

This assessment covers the following material:

  • Errors not revealed by the trial balance
  • Errors which are revealed by the trial balance
  • The principle of suspense accounts
  • Correction of errors using the journal
  • Calculating the corrected net profit

If you are unsure about attempting the assessment, it may be advisable to have a look at the work-sheet first. When you are done, please fill-in the on-line evaluation form in order for us to monitor the quality of the materials we provide for you. Tell us what we're doing right and wrong. It takes very little time, and your opinions are valued - thank you.

Each question comes with three buttons:

'HINT' - provides help if you need it
'MARK' - will tell you your mark for that question and (if you were incorrect in any way, it may give advice - be careful to read this advice).
'EXPLAIN' - should provide you with a full explanation of the answer, but this button is only active after you have attempted the question (twice, in the case of the first ten questions).

THE ASSESSMENT STARTS BELOW. NO-ONE EXCEPT YOU WILL SEE YOUR SCORE - 'BIZED' DOES NOT KEEP A RECORD.

Note that in some of these questions there is only one correct answer, but for other questions there may be more than one answer. You will be told this information in advance, so read carefully:

For questions 1 to 10 there is only ONE correct answer. Each correct answer is worth two marks. You are allowed TWO ATTEMPTS at each of the first ten questions (i.e. you are allowed a second choice if your first choice is incorrect).

Q1. Which of the following is the primary function of a suspense account?
(Select one answer)

(a) * A temporary 'holding' account for items of expenditure which appear to be unauthorised.
(b) * A temporary 'holding' account for summarising all transactions within a particular ledger
(c) * A temporary 'holding' account onto which items of expenditure are placed until they are classified according to type.
(d) * A temporary 'holding' account in order to make the trial balance totals agree.

           

Q2. Which of the following errors would be revealed by the trial balance?
(Select one answer)

(a) * The complete omission of a transaction from the books.
(b) * The debit and credit for a particular transaction is 'reversed'.
(c) * A credit entry being made without an appropriate debit entry
(d) * An error in the valuation of the closing stock for the period

           

Did you read the explanation provided by the 'explain' button for the previous question?

Q3. The trial balance of Gilligan & Co. had the following totals : Debit £33,660, Credit £34,810. The error remained undetected but it is suspected that the problem may lie in the sales ledger because a new sales ledger clerk was recently appointed. Which of the following entries needs to be made?
(Select one answer)

(a) * Debit suspense £1,150; no credit entry
(b) * Credit suspense £1,150; no debit entry
(c) * Debit suspense £1,150; Credit purchases ledger control account £1,150
(d) * Credit suspense £1,150; Debit purchases ledger control account £1,150

           

Don't forget that the MARK button often provides useful feedback as well - be sure to read this feedback!

Q4. Suppose that Gilligan & Co. (see Q3.) discovered the error a few weeks later. An invoice received from a supplier for £1,150 had been entered on the suppliers account but somehow it had been omitted from the purchases account. The double-entry for correcting this error should be:
(Select one answer)

(a) * Credit purchases £1,150, debit suspense £1,150
(b) * Credit purchases £1,150; no corresponding debit
(c) * Debit purchases £1,150, credit suspense £1,150
(d) * Debit purchases £1,150; no corresponding credit

           

Q5. Hunter and Co. had a suspense account balance of £580 (debit) before the following errors were detected and corrected:
a. £140 worth of credit sales had been entered on the sales account but not on the debtors account.
b. A payment of £165 to a creditor had been entered in their account, but the cash book had not received any entry for this transaction.
What should the double-entries be for correcting these errors?
(Select one answer)

(a) * Credit debtor £140, debit suspense £140; and debit bank £165, credit suspense £165
(b) * Credit debtor £140, debit suspense £140; and credit bank £165, debit suspense £165
(c) * Debit debtor £140, credit suspense £140; and debit bank £165, credit suspense £165
(d) * Debit debtor £140, credit suspense £140; and credit bank £165, debit suspense £165

           

Q6. Referring back to the information for Q5, what would the revised balance on the suspense account be?
(Select one answer)

(a) * £555 (debit)
(b) * £605 (debit)
(c) * £885 (debit)
(d) * None of the above

           

Did you read the explanation provided by the 'explain' 'button for the previous question?

Q7. The balance on the suspense account of Hunter & Co. was a debit one. Where on the balance sheet should this appear?
(Select one answer)

(a) * Fixed assets
(b) * Current assets
(c) * Current liabilities
(d) * Long-term liabilities

           

Q8. The auditors for Dharma Ltd. discovered that an amount of £180 owed to J.Carswell had been paid. The appropriate entry had been made in the bank account but no entry was made in Carswell's account. What is the double -entry for correcting this error?
(Select one answer)

(a) * Debit bank a/c, credit J.Carswell a/c
(b) * Debit suspense a/c, credit J. Carswell a/c
(c) * Debit J.Carswell a/c, credit suspense a/c
(d) * Debit J.Carswell a/c, credit bank a/c

           

Don't forget to fully utilise the 'hint', 'mark' and 'explain' buttons - read carefully what it says.

Q9. In the books of Gorman Ltd., discounts received of £59 had been posted to the debit side of the discounts allowed account. The entries in the relevant creditors accounts were correct. What journal entry would achieve the necessary correction?
(Select one answer)

(a) * Debit discount received £59, Debit discount allowed £59, Credit suspense £118
(b) * Debit suspense £59; Credit discount allowed £59
(c) * Debit suspense £59, Credit discount received £59
(d) * Debit suspense £118; Credit discount allowed £59; Credit discount received £59.

           

Q10. The books of Polk & Ball showed a net profit of £34,560 for the year ended 31st March, but this overlooked the following errors:
1. The sales account was over - cast by £150.
2. The wages total for the year of £5,710 had been entered as £7,510
3. A new machine (cost £590) intended as a fixed asset had been entered onto the purchases account (depreciation is not provided for in the year of purchase).
What is the corrected net profit?
(Select one answer)

(a) * £36,800
(b) * £40,400
(c) * £37,980
(d) * £37,100

           

For the last five questions there MAY BE MORE THAN ONE correct answer (but not necessarily so!). You are allowed only ONE ATTEMPT at these questions. Each question carries a total of four marks.

Q11. A book-keeping error resulted in the purchases account being undercast by £200. Which of the following would be used in correcting the error?
(Select one or more answers)

(a) * The purchases account
(b) * The suspense account
(c) * The Purchases ledger control account
(d) * The journal

           

Q12. Isiah Ltd. have just created a suspense account with a credit balance of £50. This indicates:

(Select one or more answers)

(a) * Before the suspense account was created, more debit entries had been made than there were credit entries
(b) * There is one mistake in the ledger accounts
(c) * This will appear as a current liability in the balance sheet
(d) * Correcting all the mistakes in the accounts would involve a net debit of £50 on the suspense account.

           

Q13. Newsome Ltd. discovered that a sale for £210 on credit to Smith Ltd. had been correctly entered in the sales account but had been credited to the account of Smythe Ltd. (another debtor).
Which of the following statements is true?
(Select one or more answers)

(a) * If there are no other errors then the balance on suspense account before correction of this error should be £210
(b) * Before any correction is made, the account of Smith Ltd. will suggest that no sale has been made.
(c) * The journal entry necessary in order to correct the accounts is: Debit Smith Ltd. £210, Debit Smythe Ltd. £210, Credit suspense £420
(d) * The journal entry necessary in order to correct the accounts is: Credit Smith Ltd. £210, Credit Smythe Ltd. £210, Debit suspense £420.

       

Q14. Which of the following would cause net profit to be overcast?
(Select one or more answers)

(a) * Under - casting of the purchases figure
(b) * Under - valuation of the closing stock
(c) * Under - casting of the sales figure
(d) * Not posting the discount allowed from the cash book to the discounts allowed account

           

Q15. A net profit figures of £15,600 was reported on the basis of a trial balance prepared from a set of accounts. The cost of goods sold was £5,800. It was later discovered that the purchases account was under - cast by £200. Which of the following statements are true?
(Select one or more answers)

(a) * The corrected net profit should be £15,800
(b) * The corrected cost of goods sold for the period should be £6,000.
(c) * The double - entry to correct the error should be: credit purchases account £200, debit suspense account £200
(d) * The closing stock figure for the period will be unaffected.

           

That's the end of the assessment questions. You can have your total mark calculated by clicking on the button below:

Now please fill-in the on-line evaluation form in order for us to monitor the quality of the materials we provide for you. It takes very little time, and your opinions are valued - thank you.