What should happen if the balance on a Suspense Account is of a material amount?

Should be written off to the balance sheet.

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Write it off to Profit and Loss Account.

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Carry forward the balance to the next period.

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Find the error(s) before publishing the final accounts.

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Solution

The correct option is D Find the error(s) before publishing the final accounts.
According to the Materiality convention, the accountant should give importance to those details which are material in nature and ignore the insignificant details. The accountant has to make distinction between the material and immaterial matters. otherwise accounting will be unnecessarily overburdened.
If suspense account is showing a balance of material amount, auditors has to find the errors before publishing the final accounts.

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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?

Q. Steps of preparing Final Accounts is -
(a) Trading Account
(b) Profit and Loss Account
(c) Balance Sheet

State whether the following statement are true or false.

1. Final Accounts are prepared on the basis of Trial Balance.
2. Trading Account is a part of Profit & Loss Account.
3. Profit Loss Account is prepared to find out Gross Profit or Gross Loss.
4. Gross Profit or Gross Loss is transferred to Balance Sheet.
5. An amount of net profit is added to the capital.
6. All indirect expenses are debited to trading account.
7. Balance Sheet is a statement and not an account.
8. Capital account is a personal account.
9. Amount of prepaid expenses appears on assets side.
10. Bank Overdraft is a liability of business concern.

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.

A Statement of Affairs is similar to the :

(a) Balance sheet
(b) Trial balance
(c) Trading Account
(d) Profit & Loss Account

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