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Suspense Account

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The account opened to rectify the previous year’s one-sided errors is called suspense account. It is opened for a temporary period only. Suspense account shows no balance after the rectification of all errors and it disappears automatically. The opening of suspense account does not mean that errors detected should be left unrectified.

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Preparation of suspense account

A suspense account is opened with a purpose to correct the previous year’s one-sided errors. It is used for the temporary period only. One-sided errors affect only on one side of an account. Therefore, rectification of one-sided errors is done by opening suspense account. Opening suspense account makes possible to prepare journal entries for correcting one-sided errors. Suspense account shows no balance after rectifying one-sided errors and disappears automatically.

Utility of suspense account

A suspense account is opened when one-sided errors detected after preparation of trial balance. It is the account opened for the temporary period till one-sided errors are rectified. A suspense account is debited when the debit total of trial balance remains less. It is credited by the amount short of the credit total of trial balance. The suspense account does not show any balance after the rectification of all one-sided errors. Therefore, the utilities for opening suspense account are as follows:

  • It helps to carry one-sided errors amounts to the suspense account.
  • It helps to show the total amount of errors needed to be rectified.
  • It helps to show the different accounts where rectifications are to be made.
  • It helps to draft final account along with checking of errors simultaneously.

Disposal of Suspense Account

A suspense account is opened for the temporary purpose of resolving one-sided errors. The account is of no use after all one-sided errors are rectified. Hence, the suspense account is dropped.

Effects of errors on profit or loss

Errors in nominal accounts and store ledger affect either profit or loss of the business. The difference of incomes and expenses is either profit or loss. Symbolically, incomes-expenses = profit or (loss). The accounting equation describes that every error in nominal accounts and store ledger affects either profit or loss. The errors relating to the personal and real accounts neither affect profit nor loss. Therefore, the errors in nominal accounts and store ledger affects ultimately either profit or loss. Thus, errors in nominal accounts affect the accuracy of profit or loss shown by the profit and loss account.

Types of errors and their effect either on profit or on loss

Errors in nominal account

Effect either on profit or on loss

Profit

Loss

Error on debit side

Decreases

Increases

Excess entry on debit side

Decreases

Increases

Less amount entry or less total on debit side

Increases

Decreases

Omission on debit side

Increases

Decreases

Error on credit side

Increases

Decreases

Excess entry on credit side

Increases

Decreases

Less amount entry or less total on credit side

Decreases

Increases

Omission on credit side

Decreases

Increases



  • The account opened to rectify the previous year’s one-sided errors is called suspense account. 
  • Suspense account is opened when one-sided errors detected after preparation of trial balance.
  • The difference of incomes and expenses is either profit or loss. 
.

Very Short Questions

Rectification of Errors

Date

Particulars

LF

Debit Amount

Credit Amount

a)

Salary a/c………………..Dr.

500

To wages a/c

500

(Being error rectified.)

b)

Dividend a/c…………….Dr.

200

To interest received a/c

200

(Being error rectified.)

c)

Interest a/c………………..Dr.

300

To Ramesh’s a/c

300

(Being error rectified.)

d)

Furniture a/c………………..Dr.

7,000

To purchase a/c

7,000

(Being error rectified.)

Rectification of Errors

Date

Particulars

LF

Debit Amount

Credit Amount

a)

Salary a/c……………….Dr.

4,000

To Sulav’s a/c

4,000

(Being errors rectified.)

b)

Rent a/c……………….Dr.

2,000

To Mr.Y’s a/c

2,000

(Being errors rectified.)

c)

Suspense a/c……………….Dr.

1,000

To purchase a/c

1,000

(Being errors rectified.)

d)

Suspense a/c……………….Dr.

500

To purchase return a/c

500

(Being errors rectified.)

Rectification of Errors

Date

Particulars

LF

Debit Amount

Credit Amount

a)

Sales return a/c………………Dr.

3,000

To Rupesh’s a/c

3,000

(Being errors rectified.)

b)

Binita’s a/c………………Dr.

1,200

To purchase a/c

1,200

(Being errors rectified.)

c)

Drawing a/c………………Dr.

2,000

To purchase a/c

2,000

(Being errors rectified.)

d)

Salary a/c………………Dr.

1,000

To Rupesh’s a/c

1,000

(Being errors rectified.)

Rectification of Errors

Date

Particulars

LF

Debit Amount

Credit Amount

a)

Rita’s a/c………………Dr.

1,800

To suspense a/c

1,800

(Being errors rectified.)

b)

Suspense a/c………………Dr.

2,700

To advertisement a/c

2,700

(Being errors rectified.)

c)

Hari’s a/c………………Dr.

900

To suspense a/c

900

(Being errors rectified.)

d)

Suspense a/c………………Dr.

45

To sales a/c

45

(Being errors rectified.)

Rectification of Errors

Date

Particulars

LF

Debit Amount

Credit Amount

a)

Purchase a/c……………….Dr.

8,000

Sales a/c……………….Dr.

8,000

To Shyam’s a/c

16,000

(Being errors rectified.)

b)

Rajendra’s a/c……………….Dr.

4,000

To sales a/c

2,000

To purchase a/c

2,000

(Being errors rectified.)

c)

Cash a/c……………….Dr.

500

To interest a/c

500

(Being errors rectified.)

d)

Cash a/c……………….Dr.

2,000

To Mr.X a/c

2,000

(Being errors rectified.)

0%
  • The account opened to rectify the previous year s one-sided errors is called ______.

    financial account
    ledger account
    suspense account
    cost account
  • Suspense account is opened for ______ purpose for resolving one-sided errors. 

    perpetual
    eternal
    permanent
    temporary
  • Suspense account is opened when one-sided errors detected ______.

    after preparation of trial balance
    before preparation of trial balance
    after preparation of trial balance
    after preparation of trial balance
  • Which one of them is not the utility for opening suspense account?

    Helps to draft final account along with checking of errors simultaneously.
    Helps to show the different accounts where in rectifications are to be made.
    Helps to carry one-sided errors amounts to suspense account.
    Helps to show the partial amount of errors needed to be rectified.
  • Suspense?account is opened with a purpose to correct the previous year s ______.

    double-sided errors
    one-sided errors
    all-sided errors
    two-sided errors
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