Suspense account, correction of errors, effect on profit and statement of financial position

1. The trial balance failed to agree and a suspense account was opened with a debit balance of $420. Which error would clear the suspense account completely?

A A credit balance of $420 had been omitted from the trial balance
B A debit balance of $420 had been omitted from the trial balance
C Sales account was undercast by $420
D Purchases account was overcast by $420

2. The trial balance showed debit totals exceeding credit totals by $300. A suspense account was opened. Later it was discovered that a discount received balance of $150 had been entered on the debit side of the trial balance. What entry is required to correct the error?

A Debit suspense $300, credit discount received $300
B Debit discount received $300, credit suspense $300
C Debit suspense $150, credit discount received $150
D Debit discount received $150, credit suspense $150

3. A cheque payment of $840 to a supplier was entered correctly in the cash book but omitted from the supplier’s account. What correction is required?

A Debit suspense $840, credit supplier $840
B Debit supplier $840, credit suspense $840
C Debit bank $840, credit suspense $840
D Debit supplier $840, credit bank $840

4. Which error requires the use of a suspense account when correcting?

A Repairs account debited instead of motor expenses account
B Credit sale omitted completely from the books
C Credit entry made but corresponding debit entry omitted
D Purchase of machinery debited to purchases account

5. The trial balance difference was $500. Later it was discovered that a trade receivable balance of $250 had been entered on the credit side instead of the debit side. What entry is required?

A Debit trade receivable $500, credit suspense $500
B Debit trade receivable $250, credit suspense $250
C Debit suspense $500, credit trade receivable $500
D Debit suspense $250, credit trade receivable $250

6. A sales account was undercast by $200. What is the correcting entry?

A Debit sales $200, credit suspense $200
B Debit suspense $200, credit sales $200
C Debit sales $400, credit suspense $400
D No suspense account entry required

7. Purchases returns account was overcast by $90. What correcting entry is needed?

A Debit suspense $90, credit purchases returns $90
B Debit purchases returns $90, credit suspense $90
C Debit purchases returns $180, credit suspense $180
D No correction needed

8. A payment of rent $700 was debited to rent account as $70 and credited correctly to bank. What correcting journal entry is required?

A Debit rent $630, credit suspense $630
B Debit suspense $630, credit rent $630
C Debit rent $700, credit suspense $700
D Debit suspense $700, credit rent $700

9. Which error affects profit but does not require a suspense account for correction?

A Credit entry omitted
B Debit entry omitted
C Repairs debited to machinery account
D Trade receivable balance omitted from trial balance

10. Which error affects the statement of financial position but not profit?

A Sales omitted completely
B Trade receivable balance omitted from trial balance
C Purchases omitted completely
D Discount received omitted completely

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. A suspense account has a credit balance of $240. Which error could have caused this?

A A debit balance of $240 omitted from trial balance
B A credit balance of $240 omitted from trial balance
C Sales account overcast by $240
D Purchases account undercast by $240

12. A business discovered that motor expenses of $600 had been debited to motor vehicles account. What is the correction?

A Debit motor expenses $600, credit motor vehicles $600
B Debit motor vehicles $600, credit motor expenses $600
C Debit suspense $600, credit motor expenses $600
D Debit motor vehicles $600, credit suspense $600

13. Which error causes profit to be overstated?

A Purchases account overcast
B Sales account undercast
C Repairs debited to machinery account
D Discount received omitted

14. A credit sale of $900 was posted to the customer’s account as $90. Which correcting entry is needed?

A Debit customer $810, credit suspense $810
B Debit suspense $810, credit customer $810
C Debit customer $900, credit suspense $900
D Debit suspense $900, credit customer $900

15. A trade payable balance of $350 was omitted from the trial balance. Which entry corrects the suspense account?

A Debit suspense $350, credit trade payable $350
B Debit trade payable $350, credit suspense $350
C Debit suspense $700, credit trade payable $700
D No suspense account entry required

16. Which error causes both profit and non-current assets to be overstated?

A Revenue expenditure treated as capital expenditure
B Capital expenditure treated as revenue expenditure
C Purchases account overcast
D Sales returns account overcast

17. Which error causes profit and capital to be understated?

A Discount received omitted
B Sales account overcast
C Purchases account undercast
D Drawings debited to wages account

18. A trial balance difference of $420 was traced to an expense account balance entered on the wrong side of the trial balance. The balance should have been debit $210. What is the correcting entry?

A Debit expense $420, credit suspense $420
B Debit suspense $420, credit expense $420
C Debit expense $210, credit suspense $210
D Debit suspense $210, credit expense $210

19. A suspense account balance remains after correcting several errors. What does this indicate?

A The financial statements are now correct
B At least one error affecting trial balance agreement still exists
C Profit has been correctly calculated
D Only errors of principle remain

20. Which error affects gross profit?

A Rent debited to wages
B Purchases debited to machinery
C Sales returns debited to purchases returns
D Drawings debited to capital

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

21. A sales invoice of $780 was entered in the sales journal as $870 and posted as $870 to both accounts. What is the effect?

A Profit overstated by $90, no suspense entry needed
B Profit understated by $90, suspense entry required
C Profit overstated by $180, suspense entry required
D No effect on profit

22. Which error causes current assets to be understated but leaves profit unaffected?

A Trade receivable balance omitted from trial balance
B Sales omitted completely
C Purchases omitted completely
D Discount received omitted

23. A purchase of machinery $5000 was debited to purchases account. What is the effect on profit before correction?

A Profit overstated by $5000
B Profit understated by $5000
C Profit overstated by depreciation only
D No effect on profit

24. Which correction requires only a journal transfer and no suspense account?

A Sales account undercast
B Credit side omitted
C Debit side omitted
D Rent debited to insurance account

25. A bank account balance of $1000 debit was entered as $100 debit in the trial balance. What is the suspense correction?

A Debit bank $900, credit suspense $900
B Debit suspense $900, credit bank $900
C Debit bank $1000, credit suspense $1000
D Debit suspense $1000, credit bank $1000

26. Which error causes liabilities to be understated?

A Accrued expense omitted
B Sales account undercast
C Purchases account overcast
D Discount received omitted

27. Which error causes both profit and liabilities to be overstated?

A Income received in advance treated as revenue
B Accrued expense omitted
C Discount received omitted
D Purchases omitted completely

28. Which error causes assets and profit to be understated?

A Prepaid expense omitted
B Accrued expense omitted
C Income received in advance omitted
D Drawings debited to capital

29. A credit balance of $600 was entered as a debit balance in the trial balance. What is the suspense correction?

A Debit suspense $1200, credit account $1200
B Debit account $1200, credit suspense $1200
C Debit suspense $600, credit account $600
D Debit account $600, credit suspense $600

30. A debit balance of $450 was entered as a credit balance in the trial balance. What is the suspense correction?

A Debit account $900, credit suspense $900
B Debit suspense $900, credit account $900
C Debit account $450, credit suspense $450
D Debit suspense $450, credit account $450

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

31. Which error affects only the statement of financial position?

A Repairs debited to machinery account
B Trade receivable balance omitted from trial balance
C Sales omitted completely
D Discount allowed omitted

32. Which error affects only profit?

A Accrued expense omitted
B Trade payable balance omitted from trial balance
C Prepaid expense omitted
D Revenue expenditure capitalised

33. Which error causes gross profit to be understated?

A Sales account undercast
B Rent account overcast
C Discount allowed omitted
D Machinery repairs capitalised

34. Which error causes net profit to be overstated but gross profit unchanged?

A Sales account overcast
B Purchases account undercast
C Rent account omitted
D Sales returns account omitted

35. Which error causes capital to be overstated?

A Purchases account omitted
B Revenue expenditure capitalised
C Discount received omitted
D Sales account undercast

36. A suspense account was opened with a debit balance of $540. Later a credit balance of $270 had been omitted from the trial balance. What is the remaining suspense balance?

A Debit $270
B Credit $270
C Debit $810
D Nil

37. A suspense account was opened with a credit balance of $400. A debit balance of $150 had been omitted from the trial balance. What is the remaining suspense balance?

A Credit $250
B Debit $250
C Credit $550
D Debit $550

38. Which correction decreases profit?

A Debit repairs, credit machinery
B Debit machinery, credit repairs
C Debit sales, credit suspense
D Debit suspense, credit purchases

39. Which correction increases profit?

A Debit machinery, credit repairs
B Debit repairs, credit machinery
C Debit sales returns, credit suspense
D Debit purchases, credit suspense

40. Which error results in understatement of both current assets and capital?

A Accrued income omitted
B Accrued expense omitted
C Income received in advance omitted
D Purchases account overcast

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. A customer’s account was undercast by $300. Which correction is required?

A Debit customer $300, credit suspense $300
B Debit suspense $300, credit customer $300
C Debit customer $600, credit suspense $600
D Debit suspense $600, credit customer $600

42. A supplier’s account was overcast by $180 on the credit side. Which correction is required?

A Debit supplier $180, credit suspense $180
B Debit suspense $180, credit supplier $180
C Debit supplier $360, credit suspense $360
D Debit suspense $360, credit supplier $360

43. Which error would be corrected by debiting suspense account?

A Missing debit entry
B Missing credit entry
C Undercast credit balance
D Debit balance entered as credit balance

44. Which error would be corrected by crediting suspense account?

A Missing debit entry
B Missing credit entry
C Credit balance omitted
D Credit balance entered as debit balance

45. Which statement about suspense accounts is correct?

A They are used to correct all accounting errors.
B They are opened only when trial balance totals agree.
C They are temporary accounts used until trial balance differences are resolved.
D They appear permanently in every statement of financial position.

46. A sales returns account was undercast by $250. What is the correction?

A Debit sales returns $250, credit suspense $250
B Debit suspense $250, credit sales returns $250
C Debit sales $250, credit suspense $250
D Debit suspense $250, credit sales $250

47. Purchases account was overcast by $600. What is the correction?

A Debit purchases $600, credit suspense $600
B Debit suspense $600, credit purchases $600
C Debit purchases returns $600, credit suspense $600
D Debit suspense $600, credit purchases returns $600

48. Which correction increases both profit and capital?

A Debit machinery, credit repairs
B Debit repairs, credit machinery
C Debit purchases, credit suspense
D Debit sales returns, credit suspense

49. Which correction decreases assets and increases expenses?

A Debit repairs, credit machinery
B Debit machinery, credit repairs
C Debit suspense, credit machinery
D Debit capital, credit machinery

50. Which statement best explains why suspense accounts are eventually closed?

A Because all errors affecting trial balance agreement are corrected through them
B Because they are transferred to profit for the year
C Because they become part of capital
D Because they replace control accounts

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

1. A
   A credit balance omitted from the trial balance causes debit totals to exceed credit totals.
   Correction: credit the omitted account and debit suspense.

2. A
   Discount received should be a credit balance. Entering it on the debit side creates a $300 difference (150 removed from credit and added to debit).
   Correction: Debit suspense $300, Credit discount received $300.

3. B
   Supplier should have been debited. Since the debit was omitted, correction is:
   Debit supplier $840, Credit suspense $840.

4. C
   A one-sided error creates trial balance disagreement and therefore requires a suspense account.

5. A
   Receivable should be debit $250 but was entered as credit $250.
   Difference = $500.
   Debit trade receivable $500, Credit suspense $500.

6. D
   Undercasting sales affects both sides equally when totals are posted. Trial balance still agrees. Correct sales directly; no suspense needed.

7. B
   Purchases returns account is overstated by $90.
   Debit purchases returns $90, Credit suspense $90.

8. A
   Rent should be $700 but only $70 was debited.
   Missing debit = $630.
   Debit rent $630, Credit suspense $630.

9. C
   Error of principle affects profit but not trial balance agreement.

10. B
    Omitting a receivable balance from the trial balance affects the statement of financial position only.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. A
    Missing debit balance causes credits to exceed debits, producing a suspense account credit balance.

12. A
    Repairs are revenue expenditure.
    Correction: Debit motor expenses, Credit motor vehicles.

13. C
    Capitalising repairs removes an expense, causing profit to be overstated.

14. A
    Customer should have been debited $900 but was debited only $90.
    Shortfall = $810.
    Debit customer $810, Credit suspense $810.

15. D
    A balance omitted from the trial balance is corrected in the trial balance itself, not through suspense.

16. A
    Revenue expenditure capitalised:

• Expense understated

• Asset overstated

• Profit overstated

17. A
    Discount received is income. Omitting it understates profit and capital.

18. A
    Debit balance should be $210 but appeared as credit $210.
    Difference = $420.
    Debit expense $420, Credit suspense $420.

19. B
    A remaining suspense balance means at least one error affecting trial balance agreement still exists.

20. C
    Sales returns and purchases returns affect gross profit. Misclassifying them changes gross profit.

21. A
    Sales overstated by $90.
    Profit overstated by $90.
    Same wrong amount posted to both sides, so no suspense needed.

22. A
    Receivable omitted from trial balance understates current assets only.

23. B
    Machinery purchase incorrectly debited to purchases makes purchases too high.
    Profit understated by $5000.

24. D
    Wrong expense account is corrected by journal transfer only.

25. A
    Bank should be debit $1000 but only $100 entered.
    Missing debit = $900.
    Debit bank $900, Credit suspense $900.

26. A
    Accrued expense omitted means liability omitted.

27. A
    Income received in advance wrongly treated as revenue:

• Profit overstated

• Liability understated

28. A
    Prepayment omitted:

• Asset understated

• Expense overstated

• Profit understated

29. A
    Credit balance should be credit $600 but was entered as debit $600.
    Difference = $1200.
    Debit suspense $1200, Credit account $1200.

30. A
    Debit balance should be debit $450 but was entered as credit $450.
    Difference = $900.
    Debit account $900, Credit suspense $900.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

31. B
    Only the statement of financial position is affected.

32. B
    Omitting a payable balance from the trial balance affects the statement of financial position only.

33. A
    Undercast sales reduce gross profit.

34. C
    Rent is an operating expense. Gross profit unchanged, net profit overstated.

35. B
    Revenue expenditure capitalised:

• Assets overstated

• Profit overstated

• Capital overstated

36. A
    Opening suspense debit = $540.
    Credit balance omitted = correction of $270.
    Remaining suspense = Debit $270.

37. A
    Opening suspense credit = $400.
    Correction removes $150.
    Remaining balance = Credit $250.

38. A
    Moving an amount from machinery to repairs increases expenses and reduces profit.

39. A
    Removing repairs from expenses and placing in machinery reduces expenses and increases profit.

40. A
    Accrued income omitted:

• Asset understated

• Profit understated

• Capital understated

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. A
    Undercast customer account means debit is short by $300.
    Debit customer $300, Credit suspense $300.

42. A
    Credit side overstated by $180.
    Reduce liability by debiting supplier $180 and credit suspense.

43. B
    Missing credit entry is corrected by crediting the missing account and debiting suspense.

44. A
    Missing debit entry requires debit account and credit suspense.

45. C
    Suspense accounts are temporary holding accounts for unresolved trial balance differences.

46. A
    Sales returns understated by $250.
    Debit sales returns $250, Credit suspense $250.

47. B
    Purchases overstated by $600.
    Debit suspense $600, Credit purchases $600.

48. A
    Capitalised repairs:
    Correction = Debit machinery, Credit repairs.
    Expenses decrease, profit increases, capital increases.

49. A
    Debit repairs, Credit machinery:

• Expense increases

• Asset decreases

50. A
    Suspense accounts are closed once all trial-balance-affecting errors have been corrected.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.