Suspense Account :
When it is difficult to locate the mistakes before preparing the final accounts, the difference in the trial balance is transferred to newly opened imaginary and temporary account called ‘Suspense Account’. Suspense account is prepared to avoid the delay in the preparation of final accounts. If the total debit balances of the trial balance exceeds the total credit balances, the difference is transferred to the credit side of the suspense account. On the other hand, if the total credit balances of the trial balance exceeds the total debit balances the difference is transferred to the debit side of the suspense account.
When the errors affecting the suspense account are located, they are rectified with suspense account. Suspense account is continued in the books until the errors are located and rectified. Such balance will be shown in the balance sheet. Debit balance will be shown on the asset side and the credit balance will be shown on the liability side. When all the errors affecting the trial balance are located and rectified, the suspense account automatically gets closed.
The following illustration will help to understand the suspense account :
Illustration
The following balances were extracted from the ledger of Mr.Ramakrishna as on 31st March 2003. You are required to prepare a trial balance as on that date.
| Rs. | Rs. | ||
| Drawings | 60,000 | Salaries | 95,000 |
| Capital | 2,40,000 | Sales return | 10,000 |
| Sundry creditors | 4,30,000 | Purchases return | 11,000 |
| Bills payable | 40,000 | Commission paid | 1,000 |
| Sundry debtors | 5,00,000 | Trading expenses | 25,000 |
| Bills receivable | 52,000 | Discount earned | 5,000 |
| Plant & Machinery | 45,000 | Rent | 20,000 |
| Opening stock | 3,70,000 | Bank overdraft | 60,000 |
| Cash in hand | 9,000 | Purchases | 7,08,000 |
| Cash at bank | 25,000 | Sales | 11,80,000 |
Solution :
In the books of Mr.Ramakrishna
Trial Balance as on 31st March 2003
|
S. No. |
Name of the account | L.F | Dr. Rs. |
Cr. |
|
1. |
Capital |
2,40,000 |
||
|
2. |
Drawings |
60,000 |
||
|
3. |
Sundry creditors |
4,30,000 |
||
|
4. |
Bills payable |
40,000 |
||
|
5. |
Sundry debtors |
5,00,000 |
||
|
6. |
Bills receivable |
52,000 |
||
|
7. |
Plant & machinery |
45,000 |
||
|
8. |
Opening stock |
3,70,000 |
||
|
9. |
Cash in hand |
9,000 |
||
|
10. |
Cash at Bank |
25,000 |
||
|
11. |
Sales |
11,80,000 |
||
|
12. |
Salaries |
95,000 |
||
|
13. |
Sales return |
10,000 |
||
|
14. |
Purchases return |
11,000 |
||
|
15. |
Commission paid |
1,000 |
||
|
16. |
Trading expenses |
25,000 |
||
|
17. |
Discount earned |
5,000 |
||
|
18. |
Rent |
20,000 |
||
|
19. |
Purchases |
7,08,000 |
||
|
20. |
Bank overdraft |
60,000 |
||
|
21. |
Suspense A/c. |
46,000 |
||
| TOTAL |
19,66,000 |
19,66,000 |
Note : The difference in the Trial Balance is transferred to suspense account to avoid delay in the preparation of final accounts.