Suspense accounts and the correction of errors
Many errors that are made will affect the trial balance agreement. These errors will normally consist of:
- Entering different amounts in both entries of the transaction.
- Making two debit entries (or two credit entries) for a transaction.
- Only entering one entry for a transaction.
If any of these errors are made (one or more) then the trial balance totals will not agree. In this case, the errors should be located. However, this may take time - days, weeks or even months - the more errors that have been made, the longer their location will take. If the trial balance does not agree, then we would not be able draw up the profit and loss account and balance sheet correctly.
As a part solution to this (finding the errors should always be a priority), a firm can, in effect, make the trial balance agree by entering the amount needed to make the two columns agree again. The difference between the two columns of the trial balance is filled with the creation of a new entry - this is entered in the suspense account.
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