Question

If trail a balance does not tally inspite of thorough scrutiny and the difference is substantial, then which one of the following courses would be accountant adopt?

• A. Defer preparation of financial statements.
• B. Open suspense account.
• C. Write off the difference to profit and loss account.
• D. Ignore the difference and prepare financial statements.

Answer 1

Answer: (B)

Open suspense account.

Accounting is based on the double entry system where each business transaction will have two affects i.e. one in debit and another in credit. Hence in such situation, the total of both sides must be equal so is the case with trial balance.

If trial balance is not tallied, there are chances of clerical error. These errors need to be identified. If still the differences are not identified and the difference is substantial, then the difference amount need to be transferred to a newly opened a/c "Suspense A/c".