Glossary
Suspense account
A temporary account that holds the difference when a trial balance does not agree, until errors are found.
What it means
A temporary account opened to record the difference on a trial balance pending the correction of errors.
Example
If the trial balance is RM90 short on the debit side, RM90 is placed in a suspense account.
Why it matters
Correcting one-sided errors clears the suspense account to nil.
In practice
A suspense account is a temporary account opened in the nominal ledger, usually when the trial balance totals disagree. The difference is entered there to make the trial balance balance while the errors are traced.
Suppose the debit side of the trial balance exceeds the credit side by RM90. You place RM90 on the credit side in a suspense account. As each error is traced, a journal entry clears part of the balance. Once every error is corrected, the suspense account should show nil. For example, if sales had been undercast by RM90, the correcting entry credits sales and debits suspense, closing it. It should never remain in the final accounts.
Do not confuse it with the provision for doubtful debts, which is a deliberate, ongoing estimate. A suspense account exists only because of bookkeeping errors and is meant to disappear. It does not adjust the value of any asset.
If error correction and suspense accounts are costing you marks, one of our teachers can work through a full set of corrections with you. Book a trial class.
Related terms
Syllabus reference: Cambridge 0452 and 0985, syllabus for 2027 to 2029, sub-topic 3.2 Correction of errors (page 13).
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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