Suspense Account 📊

A suspense account is a temporary account used to record the difference when a trial balance fails to agree. This difference is recorded in the suspense account until the errors causing the imbalance are discovered and corrected. ⚖️

Example: Suspense Account 📝

Clearing the Suspense Account 🚪

When errors are discovered, the suspense account must be cleared. This is done using journal entries with one side affecting the suspense account and the other side affecting the relevant account. Once all errors are corrected, the suspense account will be closed. 🔒

Example: Journal Entries to Clear Suspense Account 📚

A bookkeeper extracted a trial balance on 31st December 2011, which failed to agree by K330000. A suspense account was opened for the difference. In January 2012, the following errors were discovered:

• a) Sales Day Book had been undercast by K100000 📉
• b) Sales of K250000 to J Chola had been debited in error to J Choolwe’s account ❌
• c) Rent had been undercast by K70000 📉
• d) Discount received account had been undercast by K300000 📉
• e) A sale of motor vehicle at book value had been credited in error to Sales Account K360000 🚗

Journal Entries to Correct the Errors 📝

Suspense Account After Correction ✅

Corrected Net Profit for the Year Ended 31 December 2011 📈

• Net Profit as previously calculated: K6.8m 💵
• Add: Sales undercast K100000 📈
• Add: Discount received undercast K300000 📈
• Less: Sales overstated K360000 📉
• Less: Rent undercast K70000 📉
• Corrected Net Profit: K6770000 💰