Suspense account format

The standard format

1. Open with the trial balance difference
2. Each correcting journal entry posts to the suspense account
3. The account clears as errors are corrected
4. Any remaining balance means errors are still undiscovered

Filled example

Notes

• Only errors that make the trial balance disagree pass through the suspense account.
• Errors of omission, commission, principle and the others never touch it.
• When all such errors are found, the suspense account balance is zero.

Building and reading this format

A suspense account is a temporary holding place. Open it only when a trial balance fails to agree, and close it when the reasons are found.

Whichever side of the trial balance is short, the suspense account takes the opposite entry to make the totals agree for now. If the debit column is smaller, put the difference on the debit side of the suspense account, and the other way round.

First find the difference and open the account with that figure. Suppose the trial balance debits total RM84,600 and the credits total RM85,000. The difference is RM400, with the credits heavier.

Enter RM400 on the debit side of the suspense account. The trial balance now agrees.

Then wait for the errors to appear. Each time you find one, correct it through the journal. One side of every correcting entry goes to the suspense account, which gradually clears it.

For example, a rent payment of RM250 was credited to the bank but never debited to the rent account. The credits were too heavy by RM250.

The correction is to debit Rent and credit Suspense with RM250. Suspense then falls from RM400 to RM150.

Only errors that threw the trial balance out of balance pass through suspense.

Errors that left the totals equal do not. These include a transaction left out completely, and a transaction posted to the wrong account of the right type. They are corrected without touching the suspense account.

When every error has been found, the entries on the two sides equal the opening difference and the account closes at nil. That proves all the balancing errors were found.

If a balance remains after all known corrections, either an error is undiscovered or a correction went on the wrong side. So the suspense account works as a scoreboard.

Marks are mostly lost on direction. Opening the account on the wrong side usually means the student confused which column was short. Passing an error through suspense that never affected the balance, or missing one that did, also loses marks.

Ask each time which side the original mistake left short. The correcting entry must supply that side, and suspense takes the other.

Write each correcting journal entry in full before posting, naming the debit, the credit and the reason. Keep a running total of suspense as you go. Also state whether each correction changes profit, because some corrections do and others do not.

If you lose marks on which side suspense goes, one of our teachers can walk you through a few past-paper corrections until the method is clear. Book a trial class

Related how-to

• How to correct errors using a suspense account
• How to correct errors not shown by the trial balance

These formats are standard accounting practice with our own figures. Check your board's exact requirements on the exam boards page.