PRC-1 · Chapter 8 · Question 52 of 100
An unidentified credit of Rs. 294,000 appearing in the bank statement was accounted for in the suspense account. It was discovered that the credit was a settlement of an old outstanding balance previously written off, net of 2% bank charges. What is the correcting entry?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debit: Suspense 294,000, Bank charges 6,000; Credit: Bad debts recovered 300,000
Explanation
The gross amount recovered is 294,000 / 0.98 = 300,000. Bank charges are 6,000. Suspense is debited by 294,000 to clear the unidentified credit, bank charges are debited by 6,000, and bad debts recovered are credited by 300,000.
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