Whatis a suspense account? Is it necessary that suspense account willbalance off after rectification of the errors detected by theaccountant? If not, then what happens to the balance still remainingin suspense account?

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Solution

When Trial Balance does not agree, i.e., when the total of the debit column does not match that of the credit column, then the difference of the Trial Balance is transferred to a temporary account in order to avoid delay in preparation of the financial statements. This temporary account is termed as Suspense Account. If the debit column falls short of the credit column, then the Suspense Account is debited and if the credit column falls short of the debit column then the Suspense Account is credited.
If all the errors are detected and rectified, then the Suspense Account automatically gets closed (i.e. becomes zero). However, if still there exists any difference, then it should be transferred to the Balance Sheet. If the Suspense Account shows a debit balance, then it is shown in the Assets side and if the Suspense Account shows a credit balance, then it is shown in the Liabilities side of the Balance Sheet.

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Similar questions

What is a suspense account? Is it necessary that a suspense account will balance off after rectification of the errors detected by the accountant? If not, then what happens to the balance still remaining in suspense account?

State whether the following statements are True or False-

1) A trial balance can agree in spite of certain errors.
2) Errors committed due to lack of accounting knowledge are errors of omission.
3) Trial balance is prepared from the balance of ledger accounts.
4) Rectification entries are passed in cash book.
5) Single sided errors affect only one account.
6) Suspense account is automatically closed after rectification of all errors.
7) Errors affecting the agreement of trial balance are called on side errors.
8) There is no need to open a suspense account if the trial balance agrees.
9) All the errors can be rectified only through suspense account.
10) Compensating errors affect the agreement of trial balance.

For rectification of which of the following errors, suspense account is used?

Which of the following is incorrect with regards to suspense account in rectification of errors?

Q. State whether the following statement is True or False:-
Suspense account is automatically closed after rectification of all errors.

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