How to use a suspense account: opening and clearing it

A trial balance lists every account balance in a debit column and a credit column. If the two totals differ, there are errors in the books.

If the errors cannot be found at once, the difference is put in a suspense account. It is a temporary account that makes the two columns equal.

The balance on it says how big the difference is. It does not say what the errors are, or how many there are.

A suspense account is opened only so that work can carry on. It must be cleared to nil before the final accounts are prepared.

It has one other use. When a bookkeeper does not yet know where one side of an entry belongs, that side waits in Suspense. A receipt with no name on it is debited to Bank and credited to Suspense, then moved out when the payer is known.

Only an error that unbalanced the trial balance has a side in suspense.

An error in the second group never went into suspense. Its correction moves an amount between the two accounts that are wrong, and leaves Suspense alone.

Open the account first, then clear it one error at a time.

1. Add up both columns of the trial balance and work out the difference.
2. Open the suspense account with that figure, in the column with the smaller total. If the debits are smaller, it is a debit balance. If the credits are smaller, it is a credit balance.
3. Find an error. Ask what should have been posted, and what was posted.
4. Write a journal that supplies what is missing, or puts right the account that is wrong.
5. If the error unbalanced the trial balance, send the other side of the journal to Suspense. If it did not, the other side goes to the second account that is wrong.
6. For an entry posted to the wrong side, use twice the amount. One half cancels the wrong entry and the other half makes the right one.
7. Post the journals to the suspense account. Carry on until its balance is nil.
8. Redraft the trial balance. The Suspense line drops out, and the two columns agree.

A journal that supplies a missing debit sends its credit to Suspense. A journal that supplies a missing credit sends its debit there.

Copperfield Kitchens draws up its trial balance at 30 September. The debits total £48,590.00 and the credits total £48,935.00.

The difference is £345.00. The debit column is the smaller one, so the suspense account is opened with a debit balance of £345.00. The bookkeeper then finds four errors.

• Error 1: an insurance payment of £415.00 was credited to Bank, but never debited to Insurance.
• Error 2: a receipt of £752.00 from a customer was debited to Bank in full, but credited to Trade receivables as £572.00.
• Error 3: a payment of £55.00 for cleaning was credited to Bank, and credited to Cleaning too.
• Error 4: a new drill costing £310.00 was debited to Repairs instead of Tools.

Error 2 left Trade receivables £180.00 short of the credit it needed. Error 3 put a credit where a debit belonged, so its correction is twice £55.00. Error 4 had an equal debit and credit, so it did not unbalance the trial balance.

Three of the journals have a side in Suspense. Posted to the suspense account, they clear it.

The balance starts at £345.00 debit. Journal 1 takes it to £70.00 credit, journal 2 to £110.00 debit, and journal 3 to nil.

Both sides add up to £525.00, so every error that unbalanced the trial balance has been found.

In the redraft, Insurance goes up by £415.00, Cleaning goes up by £110.00 and Trade receivables goes down by £180.00. Tools goes up and Repairs goes down by the same £310.00, so they cancel.

The debit column becomes £48,935.00, the same as the credit column.

• Opening the account in the column with the bigger total. It goes in the smaller column, because its job is to make the two equal.
• Using Suspense to correct an error that did not unbalance the trial balance. A posting to the wrong account is moved between the two accounts.
• Correcting a wrong-side entry with the amount once. It needs twice the amount.
• Reading the balance as one error of that size. Several errors can add up to the balance, and some can pull the other way.
• Clearing the balance to an expense account without finding the errors. The errors are still in the books.
• Leaving a balance on the account at the year end. It is a temporary account.

• The suspense account has a balance of nil.
• The redrafted trial balance agrees, with no Suspense line on it.
• Each journal with a side in Suspense corrects an error that unbalanced the trial balance.
• Each journal has a narrative that says which error it corrects.

A nil balance shows that the errors which unbalanced the trial balance are corrected. Errors that left it agreeing are found by other checks, such as a supplier's statement or a bank reconciliation.