An insurance payment of Rs. 3,600 is debited to Rent Account instead of Insurance Account. Which entry rectifies the error?
Correct answer: B. Debit Insurance Rs. 3,600 and credit Rent Rs. 3,600
- A. Debit Rent Rs. 3,600 and credit Insurance Rs. 3,600
- B. Debit Insurance Rs. 3,600 and credit Rent Rs. 3,600
- C. Debit Suspense Rs. 3,600 and credit Insurance Rs. 3,600
- D. Debit Insurance Rs. 7,200 and credit Rent Rs. 7,200
Explanation
The amount is already recorded on the correct side, but in the wrong expense account. Insurance is debited and Rent is credited to transfer the amount without affecting the trial balance totals.
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About Correction of Errors and Suspense Accounts
Accounting errors are corrected by journal entries after identifying whether the mistake affects one account or both sides of double entry. Suspense accounts temporarily hold an unexplained trial balance difference and must be cleared, while errors of omission, commission, principle, original entry and reversal require different corrections.
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