Suspense Accounts

Objective A-D: Suspense Accounts

A suspense account is a temporary account used when the trial balance does not balance and the reason for the imbalance cannot be immediately identified. The difference is placed in the suspense account to allow the trial balance to balance while the errors are investigated.

For example, if total debits are £500,000 and total credits are £499,700, there is a difference of £300. A suspense account is created with a credit balance of £300 to make the trial balance balance:

Dr Suspense £0 | Cr Suspense £300 (to balance the TB)

As errors are identified and corrected, journal entries are made that include the suspense account. Once all errors are found and corrected, the suspense account balance should be zero.

Errors That Create a Suspense Account

Only errors that cause the trial balance to be unequal create a suspense account:

• One-sided entries (debit without credit, or vice versa)
• Unequal debits and credits
• Posting to the wrong side of an account
• Casting (addition) errors in ledger accounts
• Omission of one side of an entry from the ledger

Errors that do NOT affect the trial balance totals (omission, commission, principle, original entry, compensating, reversal) do NOT create a suspense account — they are corrected through normal journal entries.