When the trial balance totals do not agree and the errors cannot be found immediately the difference is put to an interim account until the errors are located. Since the errors are put to suspense the account is refereed to as a Suspense Account. The suspense account balance is entered in the Trial Balance on the same side of the balance in the suspense account.
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If the errors are not located by the end of the financial period, then the suspense account will be entered in the Balance Sheet. Whenever the errors are located they are taken from the Suspense Accounts and corrected in the account containing the error.
Below is an example:
The trial balance at December 31, 2009 for Wally West showed a difference reflecting a shortage of $100 on the credit side. A suspense account is opened and the difference of $100 is put to the credit side of the account. Net Profit was calculated to be $20,000.
March 5 of 2010 the following errors were found from the previous years errors.
(a) Credit purchases to K. Kenny $250 entered as $100 to both accounts.
(b) Cash sales $550 entered correctly to cash account but incorrectly entered to sales account as $500.
(c) Drawings from bank $750 entered correctly to drawings account, but omitted from bank account.
(d) Cash received from a debtor D. Marvin $1200 is correctly entered to cash account, but credited to D. Marvin’s account as $1900.