Suspense Account – Purpose & Treatment
When Trial Balance doesn't tally and you can't find the error immediately, what do you do? Create a Suspense Account!
What is Suspense Account?
Definition: A temporary account created to make Trial Balance tally when there's a difference that can't be immediately located.
Purpose:
- Allows you to proceed with final accounts
- Gives time to find and fix errors
- Maintains double-entry system
Nature: Temporary (should be closed once errors are found)
When is it Created?
Scenario: Trial Balance shows:
- Debit side: ₹5,00,000
- Credit side: ₹4,95,000
- Difference: ₹5,000 (Debit side excess)
Solution: Create Suspense Account with ₹5,000 on Credit side
Trial Balance (with Suspense):
- Debit: ₹5,00,000
- Credit: ₹4,95,000 + ₹5,000 (Suspense) = ₹5,00,000 ✅ Balanced!
How to Close Suspense Account
Once errors are found, rectify them. Suspense Account automatically gets closed.
Example:
Error Found: Sales ₹5,000 not posted to Sales Account (only debited Cash, credit side missing)
Rectification Entry:
| Particulars | Debit | Credit |
|---|---|---|
| Suspense A/c Dr. | 5,000 | |
| To Sales A/c | 5,000 |
Result: Suspense Account becomes ZERO ✅
Common Scenarios
Scenario 1: One-sided Entry
Error: Received ₹10,000 from Ramesh. Only credited Ramesh A/c, forgot to debit Cash A/c.
Effect: Credit side excess by ₹10,000
Suspense Entry: Debit Suspense ₹10,000
Rectification:
| Particulars | Debit | Credit |
|---|---|---|
| Cash A/c Dr. | 10,000 | |
| To Suspense A/c | 10,000 |
Scenario 2: Wrong Totaling
Error: Purchases Book totaled as ₹50,000 instead of ₹55,000
Effect: Purchases understated, Debit side short by ₹5,000
Suspense Entry: Credit Suspense ₹5,000
Rectification:
| Particulars | Debit | Credit |
|---|---|---|
| Purchases A/c Dr. | 5,000 | |
| To Suspense A/c | 5,000 |
Important Points
- Suspense is temporary: Must be closed before finalizing accounts
- Not a permanent account: Shouldn't appear in final Balance Sheet
- Can be Dr. or Cr.: Depends on which side is short
- Multiple errors: May need multiple rectification entries
Quiz
Test Your Knowledge
Question 1 of 4
1. Suspense Account is created when:
💡 Final Wisdom: "Suspense Account is like 'Miscellaneous' folder on your computer - temporary storage until you figure out where things actually belong!"