Step-by-step guide
How to correct errors using a suspense account
When a trial balance does not agree, the difference goes to a suspense account until the errors are found. Correcting entries then clear it. Here is how.
Step by step
- Open the suspense account. Enter the trial balance difference in a suspense account so the trial balance balances for now.
- Identify each error. Take the errors one at a time. Decide what was actually recorded and what should have been recorded.
- Write the correcting journal entry. Debit and credit the correct accounts. Use the suspense account for the missing side where the error affected only one side.
- Post to the suspense account. Enter each correcting figure in the suspense account.
- Check it clears. Once all one-sided errors are corrected, the suspense account balance should fall to zero.
Worked example
Total debits are RM90 less than total credits, so RM90 is debited to a suspense account. Later you find the sales account was overcast (added up RM90 too high). The correction debits sales RM90 and credits suspense RM90, which clears the suspense account.
Understanding the method
In double entry, total debits must equal total credits. If the trial balance does not agree, at least one entry is wrong. A suspense account holds the difference temporarily, so the trial balance agrees while you look for the cause.
Errors fall into two groups.
Some leave debits and credits equal, so the trial balance still agrees. These are errors of omission, commission, principle, original entry, complete reversal and compensating errors. They never use the suspense account.
The second group stops the trial balance agreeing. Examples are an entry made on one side only, different amounts debited and credited, or a balance left out of the trial balance. These are the errors that suspense clears.
Deciding which group an error belongs to tells you whether the correcting journal needs suspense.
For each error, write the entry that was made, then the entry that should have been made. The correcting journal moves you from the first to the second. Where the wrong entry was one-sided, suspense supplies the missing side.
Here is an example. The trial balance credits exceed the debits by RM360, so suspense is debited RM360. Three errors are found.
Rent of RM70 was credited to cash but never debited to the rent account. Insurance of RM150 had the same problem. The sales account was overcast by RM140, so its credit total was too high.
The corrections are: debit rent RM70, credit suspense RM70. Debit insurance RM150, credit suspense RM150.
Debit sales RM140, credit suspense RM140. The suspense account now has a debit of RM360 and credits of 70 + 150 + 140 = RM360, so it clears to nil.
If suspense does not reach zero, one correction is probably the wrong way round, or an error is still undiscovered. Rebuild the account line by line to find it.
A common mistake is using suspense for an error that did not affect the trial balance. That creates a new imbalance. Another is forgetting that an amount posted to the wrong side of an account needs twice the amount to correct it.
One entry cancels the mistake and one posts it properly. Also decide whether a total is too big (overcast) or too small (undercast) before choosing the side to correct.
Finally, check which side the opening suspense balance sits on. If debits were short, suspense is a debit. If credits were short, it is a credit.
If correcting journals keep leaving your suspense account unbalanced, one of our teachers can go through each error with you and show where the debit and credit belong. Book a trial class
Related skills
The methods here are standard accounting practice, with original figures. For your exam board's exact requirements, see exam boards and Sources.
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