Explanation of Mr. A's Accounting Situation

Trial Balance

A trial balance is a statement of all the debits and credits in a company's general ledger, with the debits listed on the left and the credits on the right. The totals of each column should be equal, indicating that the accounting records are accurate.

Difference in Trial Balance

If the totals of the debits and credits in a trial balance do not match, it indicates an error in the accounting records. The difference between the two columns is called a trial balance discrepancy or simply a difference.

Closing of Book of Accounts

At the end of a financial period, a company closes its book of accounts to prepare financial statements. In Mr. A's case, he closed his book of accounts on September 30, 2014.

Suspense Account

A suspense account is an accounting tool used to temporarily hold transactions that cannot be immediately identified or allocated to specific accounts. It is a temporary account that is used until the proper account can be determined.

Carrying Forward of Difference in Suspense Account

In Mr. A's case, he had a difference of Rs. 800 in his trial balance, with the credits being short. Instead of trying to identify and correct the error, he carried forward the difference in a suspense account. This means that the Rs. 800 will be held in the suspense account until the error is identified and the proper accounts are adjusted.

Conclusion

Closing the book of accounts with a discrepancy in the trial balance is not recommended as it could lead to inaccurate financial statements. It is important to identify and correct any errors before closing the books of accounts. In Mr. A's case, carrying forward the difference in a suspense account is a temporary solution that should be followed up with a thorough investigation to correct the error.

Difference in suspense accounts is 2870