PRC-1 · Chapter 8 · Question 1 of 100
Insurance premium paid of Rs. 1,305 was correctly recorded in cash book but was not posted to Insurance expense account. What journal entry must be recorded to correct this error?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) DEBIT: Insurance expense Rs. 1,305 and CREDIT: Suspense Rs. 1,305
Explanation
Because the cash book was correctly recorded, the credit to cash exists. The missing debit to the insurance expense account caused a trial balance imbalance, requiring a debit to the expense and a credit to the suspense account.
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