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I saw your lecture on suspense account but i’m unable to understand why it is used. Please correct me.
Suspense account is used when the total debits and credits of trial balance do not tally which means there are errors.
Therefore we must open the suspense account to keep a check on the untally amount although it is not a real account (rather it is a waiting account)
We should add the extra debits or credits whatever side is less. Then we should investigate the errors that create difference between debits and credits.
We should adjust those errors in the suspense account. When the suspense account is balanced we will be left with zero balance.
(Please tell me whether i am correct until here?)
Secondly, do we move the balances of suspense account into financial statements. Where does the amount usually go from suspense account?
Thank you in advance.
You are correct.
The suspense account does not appear anywhere in the final accounts because the balance will be zero. (If it is not zero then there must still be errors and they need to be found.)
Thanks for your answer 🙂
The balance on suspense account is not recognized in the Financial statements. I hope this is what you meant by Final Accounts (if not then please explain).
Because the balance will remain in the suspense account until the errors are resolved and then it will get to zero balance.
The final accounts are the financial statements.
The suspense does not appear because it will have a zero balance.