PRC-1 · Chapter 8 · Question 5 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. The amount was 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 receipt represents bad debts recovered. The gross amount is 300,000 (294,000 / 0.98). Bank charges are 6,000. Suspense is cleared by a debit of 294,000, bank charges are debited by 6,000, and bad debts recovered are credited by 300,000.
More Correction of Errors MCQs
- Q7A sale of Rs. 200 recorded in sales day book to BTS & Co was credited to their account. What journal entry must be recorded to correct…
- Q8A bad debt of Rs.500 was written off by debiting 'Bad and Doubtful Debts Expense' but wrongly credited to 'Payables' instead of…
- Q9A bad debt of Rs. 900 was recorded by debiting 'Allowance for Doubtful Debts' and crediting 'Receivables.' What is the correcting entry to…
- Q10Closing inventory includes an item valued at cost of Rs. 12,000. The net realizable value of this item is Rs.14,000. The entity uses…
- Q11Goods purchased from supplier worth Rs. 200,000, no entry made in purchases book is an example of: