Suspense Accounts

You can watch a lecture on suspense accounts if you look at the ACCA Paper F3 lectures – this may help you.

Suspense accounts are difficult for many people.

We use them when the bookkeeper has made mistakes and they have made debit entries and credit entries that are not the same.
For example, maybe they debited an account with 420 but by mistake credited an account with 240 (instead of 420). There is a difference of 420 – 240 = 180, and the trial balance will not balance.

The problem in real life is that although the trial balance will not balance by 180, it then means we have to check everything to find out where the mistake was.
So…..we create a suspense account with a credit balance of 180. Now the trial balance will balance, but we know that we have to find an error of 180.

When we find it (the mistake was crediting an account with only 240 when we should have credited with 420) what we do is put the mistake right. We do this by simply crediting the account with another 180. Now everything is perfect.

If we debit the suspense account with 180, then it has a balance of zero now – that means that there is no longer any mistake left to find.

I hope that makes sense. Some mistakes are less obvious, but the idea is always the same – the suspense account shows the error that we have to find. Whenever we find an error, we debit or credit to put the mistake right and put the double entry to the suspense account.