When a trial balance does not agree, the books cannot be used until the difference is dealt with. A suspense account is the temporary holding place for the difference. It lets the trial balance balance at once while the errors are tracked down and corrected.
This topic shows how to open a suspense account, which errors involve it, how to correct them, and the other use of the account when a bookkeeper does not know where to post an entry.
A suspense account question appeared in 11 of the 20 diets reviewed, usually for 3 to 8 marks with the correcting journals. Read the topic on correction of errors first. The next topic covers bad debts and the allowance for doubtful debts.
In 30 seconds
A Suspense account is a short-term account that holds a trial balance difference until the errors are found and corrected. Open it with the figure that makes Total debits equal total credits: a Debit if credits exceed debits, a Credit if debits exceed credits. Only errors that make the debit and credit amounts Different involve it. Errors with equal debits and credits are corrected without it.
When all errors are corrected, the balance is Nil. A bookkeeper may also open it deliberately for an entry whose other side is unknown.
Opening a suspense account
Errors where the debit and credit amounts differ make the trial balance totals differ. Until the errors are found the first step is to open a suspense account. It is opened with a debit or a credit balance of the amount that makes the debit and credit balances equal, including the suspense account itself. If the totals are debits ₦456,000 and credits ₦488,000, the suspense account is a Debit of ₦32,000.
Opening it completes the missing and incorrect double entries, but in the wrong place. The errors are then investigated and corrected, usually by a double entry that involves the suspense account, until its balance is nil.
Correcting errors through the suspense account
Ask two questions about each error.
- Decide whether the error has made the total debit and credit amounts different. If it has, the correction involves the suspense account. If it has not, correct it without the suspense account, as in the previous topic.
- Identify which general ledger account holds the error and what must be done to correct its balance. The method of drawing two memorandum accounts, what was recorded and what should have been recorded, still applies. The suspense account provides the balancing figure.
Example 1. A rent debit was entered as ₦5,000 instead of ₦5,500, while the bank entry was correct. The debit is ₦500 short, so the suspense account is opened with a debit of ₦500. The correction is Dr Rent ₦500, Cr Suspense ₦500.
Example 2. A sales day book total of ₦1,800 was posted correctly to sales, but ₦1,080 was posted to receivables. Receivables should be ₦1,800, so it needs a debit of ₦720, and the correction is Dr Receivables ₦720, Cr Suspense ₦720. (The difference is 1,800 − 1,080 = 720, not ₦920.)
Example 3. An unexpected settlement discount was correctly credited to receivables, but the other side was credited to discounts received by mistake. Revenue should have been debited with ₦4,000 and was not, and discounts received was credited with ₦4,000 in error. Total credits are ₦4,000 too high and total debits ₦4,000 too low, so credits exceed debits by ₦8,000 and the suspense account is opened with a Debit of ₦8,000.
The correction is Dr Discounts received ₦4,000 (reversing the wrong credit), Dr Revenue ₦4,000 (the missing debit), Cr Suspense ₦8,000.
Example 4. A payment to a supplier of ₦23,500 was credited to bank but not debited to payables. Credits exceed debits, so the suspense account is a debit of ₦23,500. The correction is Dr Payables ₦23,500, Cr Suspense ₦23,500.
A deliberate suspense entry
Sometimes a bookkeeper opens a suspense account on purpose. A cheque of ₦1,000 arrives and nobody knows who sent it or why. Rather than set it aside, the bookkeeper debits bank and credits the suspense account. The entry is cleared when the source is known.
The ideas in more depth
Direction. Credits exceed debits: the suspense balance is a debit. Debits exceed credits: it is a credit. A wrong-side error counts twice. A ₦X amount posted on the wrong side moves the totals apart by 2X. Suspense at the year end. An uncleared balance must not remain in the statements. Errors are cleared first. Which errors need it. Only one-sided or unequal entries.
Profit. Correcting an error through the suspense account changes profit only if an expense or income account is corrected.
Worked example: Kaduna Retail
Scenario. A trial balance shows debits ₦3,846,000 and credits ₦3,912,500. Errors: (1) rent of ₦45,000 was debited as ₦40,500, the bank entry being correct; (2) a discount received of ₦12,000 was credited to discount received and also credited to payables; (3) a payment of ₦38,000 to a supplier was credited to bank and not debited to payables. Required: the suspense account and corrections.
- Opening.
Credits exceed debits by 3,912,500 − 3,846,000 = 66,500, so the suspense account is a Debit of ₦66,500. - (1) Dr Rent 4,500, Cr Suspense 4,500.
- (2) Payables should have been debited 12,000 but was credited 12,000, so it needs a debit of 24,000. Dr Payables 24,000, Cr Suspense 24,000.
- (3) Dr Payables 38,000, Cr Suspense 38,000.
- Suspense account. Debit: opening 66,500.
Credits: 4,500 + 24,000 + 38,000 = 66,500.
The balance is Nil.
Common mistakes in the exam
- Opening the suspense account on the wrong side. Credits exceed debits means a debit.
- Using the suspense account for an error with equal debits and credits.
- Correcting a wrong-side entry by the amount of one entry instead of double.
- Leaving a balance in the suspense account at the end.
Quick revision
- Credits exceed debits: suspense debit. Debits exceed credits: suspense credit.
- Only errors with unequal debit and credit amounts involve it.
- Each correction journal has one side in the suspense account. The balance ends at nil.
- Unknown entries can be held in suspense until identified.
Practice questions
These are original questions in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one first.
Section A style: multiple choice
Question 1. A suspense account is:
- A bank account
- An expense account
- A source document
- A temporary account holding a trial balance difference
Show the answer
D. A suspense account is temporary. It holds a trial balance difference until the errors are found.
Question 2. Credits exceed debits by ₦4,000. The suspense account is:
- A credit of ₦4,000
- A debit of ₦8,000
- Nil
- A debit of ₦4,000
Show the answer
D. A debit makes the totals equal.
Question 3. Debits exceed credits by ₦7,500. The suspense account is:
- A debit
- Nil
- A credit
- An asset
Show the answer
C. Debits exceed credits, so a credit is needed to balance. The suspense account has a credit balance of ₦7,500.
Question 4. Which error would need a suspense account?
- A wrong account of the same type
- A debit with no matching credit
- An entire transaction omitted
- A compensating error
Show the answer
B. A one-sided entry, a debit with no matching credit, creates a difference that must be held in suspense.
Question 5. Which error does NOT need a suspense account?
- Telephone posted to electricity
- A credit with no debit
- A casting error
- A transposition on one side
Show the answer
A. Debits and credits are still equal.
Question 6. After all errors are corrected the suspense balance is:
- A debit
- A credit
- Nil
- The old difference
Show the answer
C. When all the errors are corrected, the suspense balance is cleared to nil.
Question 7. An unidentified cheque of ₦50,000 is received. The entry is:
- Dr Bank, Cr Suspense
- Dr Suspense, Cr Bank
- Dr Sales, Cr Bank
- No entry
Show the answer
A. The cheque is banked, so debit bank. The credit is held in suspense until the source is identified.
Question 8. Rent was debited as ₦5,000 for ₦5,500, with bank correct. The correction is:
- Dr Suspense ₦500, Cr Rent ₦500
- Dr Rent ₦5,500, Cr Bank
- No correction
- Dr Rent ₦500, Cr Suspense ₦500
Show the answer
D. Rent was understated by ₦500, so debit rent ₦500. The credit clears the suspense balance.
Question 9. A ₦6,000 entry is credited twice instead of debit and credit. The suspense balance is:
- A debit of ₦12,000
- A credit of ₦12,000
- A debit of ₦6,000
- Nil
Show the answer
A. Credits exceed debits by 2 × 6,000.
Question 10. A balance left in suspense at the year end should be:
- Shown as profit
- Cleared by investigating the errors
- Ignored
- Added to capital
Show the answer
B. A suspense balance means errors remain, so investigate and correct them. It must not be hidden or ignored.
Section B style: written questions
Question 11 (10 marks). (a) Define a suspense account. (2 marks) (b) A trial balance has debits of ₦612,400 and credits of ₦598,900. State the suspense balance and its side. (3 marks) (c) Give the entries for an unidentified cheque of ₦50,000 and say when it is cleared. (5 marks)
Question 12 (20 marks). A trial balance has debits of ₦5,214,000 and credits of ₦5,207,300. Errors: (i) a payment of ₦30,500 to a supplier was debited to payables and not credited to bank; (ii) the sales day book was overcast by ₦8,000, receivables being correct; (iii) a sales return of ₦9,500 was credited to sales returns instead of debited; (iv) a discount allowed of ₦3,200 was debited to discount allowed and not credited to receivables.
(a) Open the suspense account. (2 marks) (b) Prepare the correcting journals. (10 marks) (c) Show the suspense account. (5 marks) (d) State TWO reasons for opening a suspense account. (3 marks)
A further written question
Question 13 (10 marks). For each error state whether a suspense account is needed and give the journal. (i) Rent of ₦20,000 debited to rates. (ii) Cash of ₦16,000 from a customer debited to bank, no credit made. (iii) The sales day book undercast by ₦7,000, receivables correct. (iv) ₦9,000 expense credited to bank, no debit made.
Model answers
Show the model answer to Question 11
(a) A temporary account that holds a trial balance difference until the errors are found. (b) Debits exceed credits by 612,400 − 598,900 = 13,500, so a Credit of ₦13,500. (c) Dr Bank 50,000, Cr Suspense 50,000. It is cleared when the source is known, by Dr Suspense and Cr the right account.
Show the model answer to Question 12
(a) Debits exceed credits by 6,700: a Credit of ₦6,700. (b) (i) Dr Suspense 30,500, Cr Bank 30,500. (ii) Dr Sales 8,000, Cr Suspense 8,000. (iii) Dr Sales returns 19,000, Cr Suspense 19,000. (iv) Dr Suspense 3,200, Cr Receivables 3,200. (c) Credit: opening 6,700, (ii) 8,000, (iii) 19,000 = 33,700. Debit: (i) 30,500, (iv) 3,200 = 33,700. The balance is nil. (d) To make the trial balance agree until errors are found; to hold an entry whose other side is unknown.
Show the model answer to Question 13
(i) No. Dr Rent 20,000, Cr Rates 20,000. (ii) Yes. Dr Suspense 16,000, Cr Receivables 16,000. (iii) Yes. Dr Suspense 7,000, Cr Sales 7,000. (iv) Yes. Dr Expense 9,000, Cr Suspense 9,000.
Pathfinder on Suspense accounts
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
From the previous syllabus. Asks you to prepare the suspense account after correcting eight errors. Parts (a) and (c) belong to the error topic.
Revise first: Correcting errors through the suspense account
From the previous syllabus. Both ask you to open a suspense account and post the entries needed to clear it, after a control account reconciliation.
Revise first: Opening a suspense account
From the previous syllabus. Asks for the suspense account showing the amount by which the trial balance did not agree.
Revise first: Opening a suspense account
From the previous syllabus. Asks for the suspense account after correcting errors with a debit excess of ₦8,204,000.
Revise first: Correcting errors through the suspense account
From the previous syllabus. Asks for the suspense account for a trial balance with a credit excess of ₦1,030,000.
Revise first: Correcting errors through the suspense account
From the previous syllabus. Asks what a suspense account is (2 marks) and for the suspense account (4 marks).
Revise first: Opening a suspense account
From the previous syllabus. Asks for the suspense account for a sole trader’s trial balance that failed to agree.
Revise first: Correcting errors through the suspense account
From the previous syllabus. Asks for the suspense account for a debit excess of ₦863,000.
Revise first: Correcting errors through the suspense account
From the previous syllabus. Asks which errors would cause a suspense account to be raised.
Revise first: Correcting errors through the suspense account
An item occasionally asks which error needs a suspense account or the balance to open it. Check Section A of every diet you practise.
Revise first: Opening a suspense account
Source: ICAN Pathfinder, Financial Accounting. Diets covered: November Diet, 2014, November Diet, 2015, May Diet, 2016, May Diet, 2017, November Diet, 2017, May Diet, 2018, November Diet, 2018, November Diet, 2020, May Diet, 2022 and November Diet, 2023 (all previous syllabus). Diets before November 2014, and November Diet, 2024 onwards, are not covered here.
Spotted a mistake? Tell us and we will check it.
