The Suspense Account (Cambridge (CIE) IGCSE Accounting): Revision Note

If the account is not balanced after correcting errors, then there are still unidentified errors in the other accounts.

You might still be asked to make journal entries alongside a suspense account. Remember that one of the accounts for each journal entry should be the suspense account.

Jonas prepared a trial balance on 31 March 2024 and the totals were not equal. Credits were $590 higher than debits. The following errors were identified.

1. Credit purchases of $850 to Nicki had been correctly entered in the purchases account, but credited as $580 in Nicki’s account.

2. The sales account had been overstated by $740.

3. Discount allowed, $400, had been credited to the discount received account.

4. Vehicle expenses, $50, had been debited to the vehicles account.

5. A payment of $260 from a credit customer, Timmy, had been entered correctly into the cash book but had been debited to Timmy’s account.

6. Purchases returns, $160, had been entered correctly in the purchases ledger but had been omitted from the purchases returns account.

Prepare the suspense account to correct the errors. Start with the difference on the trial balance.

Answer:

The debit total was smaller on the trial balance, so put the difference on the debit side of the suspense account.

Deal with the errors one at a time.

1. Credit $270 to Nicki’s account ($850 - $580), then debit the suspense account.

2. Debit $740 to the sales account to reduce it, then credit the suspense account.

3. Discount allowed should have been debited to the discount allowed account. Debit $400 to the discount received account and debit $400 to the discount allowed account. Then credit the suspense account.

4. This is an error of principle that does not affect the balancing of the trial balance. Therefore, no entries are made into the suspense account to correct the error.

5. Timmy’s account should have been credited. Credit $260 to Timmy’s account twice, once to undo the incorrect posting and once to enter the correct posting. Then debit the suspense account.

6. Credit $160 to the purchases returns account. Then debit the suspense account.

Suspense Account