Suspense accounts

Suspense accounts

If a trial balance does not balance a suspense account may be opened to make it balance.  This is caused by the PUPAT errors (discussed here) but most of the CROPOC errors can usually be fixed without the use of the suspense account

If the trial balance has a total of debit balances of £10000 but only £9500 for the totals of the credit  balance then the trial balance doesn’t balance.  We then open a suspense account by making a credit entry (this is the only time we don’t do double entry).  We then look at what the problems are.

Fixing the trial balance

Try to think of the suspense account as the other account if one is not mentioned in the question

e.g. if Sales is overcast (added up too high) by £300 then it has too much. So to fix it : -

Debit the Sales (to reduce it) £300

Credit another account – (since nothing else was wrong) suspense £300

Continue looking at what was wrong and fixing THAT account then make the other entry in the suspense account.

e.g. Wages were debited twice with £800

To fix it we need to

Credit the wages with £800

Debit the suspense with £800

By the time all these errors are then corrected and the suspense account must balance.  There is no balance brought down  – errors are not carried over to next year!!  In some exam questions you need to find the trial balance shortfall so you will not know if you got it right!

Here is what the suspense account would look like