The City School
Gulshan Boys Campus
Senior Section
Suspense Account
Errors which result the trial balance not balancing are as follows:
An error of addition within the trial balance.
An error of addition within one of the ledger account.
Entering a different figure on the credit to that entered on the debit when making a double entry in
the ledger.
Making a single entry for a transaction rather than a double entry.
Entering a transaction twice on the same side of the ledger.
Examples of Common Errors in the Trial Balance:
Purchases under-casted or over-casted.
Sales under-casted or over-casted.
Expenses recorded twice.
Discount allowed recorded in discount received and discount received recorded in discount allowed.
Withdraw goods for personal use, recorded correctly in the drawing account but no other opposite
entry was made.
Trade Receivables and Trade Payables were listed wrongly.
Suspense Account:
It is a temporary account which is created to balance the trial balance by inserting the difference between the
two sides until the errors are found. Later, they are corrected by means of a journal entry. When the errors
are found and corrected, the suspense account is closed automatically.
Once a suspense account is opened, draft financial statements can be prepared even if all the errors are not
found. In this case, the balance on the suspense account will appear in a balance sheet (as asset if it is a debit
balance and as a liability if it is a credit balance).
Example Question:
SLA’s financial year ends on 31 October. The total of the trial balance prepared on 31 October 2008 failed
to agree. The difference of $260 was shortage on the debit side. This was entered in a suspense account. The
following errors were later discovered.
a) The purchase account had been over-cast by $110.
b) No entry had been made for office expenses, $20, paid in cash.
c) Credit sales of $630 to Akram had been correctly entered in the sales account but debited as $360 in
Anil’s account
d) Capital introduced by SLA of $5000 has been debited to the capital account and credited to the bank
account.
e) A cheque of $200 received from customer (Ali) has been correctly entered in the bank account, but
no other entry has been made.
f) Return inward of $150 have been correctly entered in the debtor’s account but have been credited to
the return outward account.
Required:
Prepare the necessary journal entries to correct these errors. Write up the suspense account in SLA’s ledger.
Date Details Debit Credit
SLA
Suspense Account
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Statement of Revised Profit:
$ $ $
Profit for the year XXX
Increase Decrease
Errors 1 XXX
Errors 2 (XXX)
Errors 3 XXX
Errors 4 (XXX)
Revised Profit for the year XXX
Practice Questions
Question#1:
Questions#2:
Question#3:
Questions#4:
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Questions#5:
