Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes: The Suspense Account

  • A trial balance is prepared in order to:
    1. Ease the process of preparing financial statements
    2. To reveal errors
  • Errors that are revealed by the trial balance include:
    1. Addition and other arithmetic errors
    2. Single/Incomplete entries into the books
    3. Entering different amounts on the debit and credit sides of the books
  • There are some errors that cannot be revealed by a trial balance
  • These errors can be corrected by making journal entries and transferring these entries into the relevant books of accounts as soon as the said errors are discovered
  • Similarly when there are errors that are revealed by a trial balance an attempt has to be made to find and correct these errors
  • Due to circumstances that prevail during the end of trading periods however it might not be possible to find all these errors in time
  • In such cases the trial balance can be made to agree by inserting the difference between the two sides in a suspense account
  • Consider the following Trial Balance:
Capital15 000
Land and Buildings10 000
Motor Vehicle3 000
Furniture and Fittings2 000
Trade Creditors2 000
Bank Loan3 000
Trade Debtors (Accounts Receivable)3 000
Cash at Bank2 500
Cash in Hand500
Sales12 000
Purchases9 000

32 000

32 000

  • The Debit side was less than the credit side by $550 and the figure is inserted as Suspense
  • In the Suspense Account the following entry is made to show this:
General Ledger
Suspense Account
31 MayTrial Balance Difference550

The suspense account and The Statement of Financial Position (Balance Sheet)

  • Sometimes the errors cannot be found and corrected by the time Financial Statements are prepared
  • In such instances the suspense account has to be shown in the financial statements in the Statement of Financial Position
  • In instances where:
  • The Suspense Account has a debit balance it is shown on the assets side of the balance sheet/Statement of Financial Position
  • The Suspense Account has a credit balance it should be included on the capital and liabilities side of the balance sheet
  • An example of a debit balance in a suspense account is shown below:
Fixed Assets


Total Fixed Assets102500
Current Assets
Total Current Assets62170
Less: Current Liabilities


Working Capital




Capital (opening balance)114202
Add Net Profit


Less Drawings



Suspense and Accuracy of the financial statements

  • Financial statements are supposed to show a true and fair position of the business
  • They are not supposed to be accurate but rather they are supposed to show all material transactions
  • Small errors can be squirreled away in a Suspense Account without affecting this true and fair value
  • Looks can be deceiving however as it is possible for two very large errors to cancel each other and presenting the impression of it being a small error
  • For example Sales are under cast by $5000 while purchases are under cast by $4950
  • In such cases, if these are the only errors that occurred we would create a suspense account with a debit balance of $50
  • This hides the fact that two large errors occurred
  • For this reason the suspense account must only be used as a last resort after thorough investigations have been carried out

To access more topics go to the Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes.