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AT THE END OF THE TRADING PERIOD 2014, A BUSINESS MAN PREPARED HIS YEARLY INCOME STATEMENT. AFTER OBTAINING HIS NET PROFIT, HE PREPARED A BALANCE SHEET BUT IT DID NOT BALANCE. DOES THIS SITUATION REQUIRE THE USE OF A SUSPENSE ACCOUNT?
Before he started to prepare the statements of profit or loss and financial position, your businessman should have extracted a trial balance. If that trial balance had not balanced, then he could use a suspense account.
In the situation that you have proposed, the only way in which his statement of financial position is going to balance is if he introduced a fictitious asset or liability – neither of which solution gets us any closer to ideal!
And why have you chosen to post what is clearly an accounting F3 type topic within the F4 Law pages?
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