What is a Suspense Account
In spite of best efforts, locating errors is not an easy task and may take some time. Unless detected and located, errors cannot be corrected. To avoid delay in the preparation of financial statements, the amount of difference of the trial balance is temporarily put in an account called "Suspense Account" so as to tally the trial balance by putting the difference on the shorter side. When all errors are located and rectified, the suspense account would close automatically. But in case some balance still remains in the suspense account, due to non location of errors, it will be shown in the balance sheet on the asset side in case of debit balance and on the liabilities side in case of credit balance.
Utility of Suspense Account
The main use of suspense account is to facilitate the preparation of financial statements. Later on errors affecting the trial balance are located; rectification entries are passed through the suspense account.
Disposal of Suspense Account
When all the errors are located and rectified by passing the necessary journal entries, the suspense account automatically stands disposed off.
- Trial Balance
A trial balance is a summary of balances of all accounts recorded in the ledger. The trial balance is prepared at the end of a chosen period which may either be monthly, quarterly, half-yearly or annually or as and when required.
- Trial Balance Errors
Steps taken to identify errors of the trial balance, Identifying the errors of the trial balance, Overcoming with the errors of the Trial Balance...
More by this Author
Accounting Assumptions in Accounting; Accounting entity Assumptions, Money measurement Assumptions, Going concern Assumptions and Accounting period Assumptions.
What is Financial Accounting, Objectives of Accounting, Limitations of Accounting, Role of Accounting. Differences between Accounting and Book-Keeping, Objectives of Accounting.
Agriculture is one of the most widespread activities in the world, but its character is not uniform throughout. A number of scholars have attempted to identify various types of agriculture.