Help required - Suspense accounts

geek84
geek84 Registered Posts: 568 Epic contributor 🐘
Hi Folks

Is anybody familiar with the concept of Suspense accounts? Is it true that they are only used when the TB does not balance? Also, is it true that they are only used when an error is found on one part of the double entry and so the other side of the double entry is goes in the suspense account?

I have an assignment to complete where the TB does not balance. I have put the balancing figure for the TB into the suspense a/c to start off with, and now I need to put the following entries in the suspense account . I shall be grateful if you can guide me as to which a/c I should put the entries-

1. A purchase invoice has been posted to the wrong supplier a/c.
2. The Sales Day Book has been overcast by £290.
3. A chq payment for repairs to office building for £210 has been entered in a/c for £120
4. A payment by chq to a supplier has been debited in the cash book and credited to the supplier's a/c.
5. The purchase of a van for £7300 has been correctly entered in the bank a/c but debited to the van a/c as £8450.
6. A credit sale of £1500 to a customer has not been entered in the accounts.

Many thanks in advance for any help given.

Thank You.

Comments

  • coojee
    coojee Registered Posts: 794 Epic contributor 🐘
    The best way to deal with these types of questions is to draw up the T account showing the incorrect transaction. Then you can think about what you need to do to correct it. The corrections may not always involve the suspense account.

    Example 1

    A cheque for £96 for travel expenses has been posted to the bank and to travel expenses as £69.

    Step 1 - Draw up the T accounts for bank and travel and enter DR Travel, CR Bank £69. As this is a two sided entry that balances you know that the suspense account isn't involved.
    Step 2 - What should the T accounts look like? Travel should have a DR amount of £96 on it and Bank should have a CR amount of £96 on it.
    Step 3 - WHat do you need to do to correct the 2 accounts? You need to DR Travel with £27 (£96 - £69) and CR Bank with £27
    Now both accounts are correct.

    Example 2

    A cheque for £100 for postage has been correctly entered into the bank account but no other entries have been made.

    Step 1 Draw up T accounts for Bank and Postage and enter what's already been entered, ie CR Bank £100 and no entry in the postage account. As this is a one sided entry and doesn't balance then you know that the suspense account must have been brought into play.
    Step 2 - What should the T accounts look like? Postage should have a DR of £100 on it and Bank should have a CR of £100 on it.
    Step 3 - What do you need to do to correct? Since Bank is already correct we don't need to make an entry there. Postage currently has nil on it so we need to DR £100 to Postage. The CR will go to suspense as we've identified that the suspense account has been used.

    If you work through every example in this way you should get the right answer.
  • geek84
    geek84 Registered Posts: 568 Epic contributor 🐘
    Hi CooJee

    Many thanks for your reply. I do basically understand how to use suspense accounts, but I am a bit confused on the following points per my original email -

    1. Point 3 regarding chq payment - it says a figure has been entered incorrectly in the accounts. What does it mean by 'accounts'.
    2. Again regarding point 6 about the credit sale, what does it mean by the fact that it has not been entered in the accounts?

    Thanks in advance for your response.
  • coojee
    coojee Registered Posts: 794 Epic contributor 🐘
    Point 3 "A chq payment for repairs to office building for £210 has been entered in a/c for £120" This is exactly the same as my example 1. What they mean by accounts is the ledger accounts that would normally be used for this transaction.

    Point 6 "A credit sale of £1500 to a customer has not been entered in the accounts." This hasn't been entered at all. What is the normal double entry for a credit sale?
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