ACCA Applied Knowledge · Financial Accounting · Suspense accounts
Which of the following is the main purpose of opening a suspense account when a trial balance does not balance?
A suspense account temporarily holds the difference in an unbalanced trial balance until the causes are found and corrected. It should be cleared to nil, not kept permanently, because it only exists to allow the trial balance to agree while the errors are investigated.
- ATo hold the difference temporarily until the errors causing it are found and correctedCorrect
- BTo record permanently any difference that cannot be explained
- CTo replace the need for a trial balance
- DTo record transactions that have no effect on profit
Explanation
A suspense account is a temporary holding account that makes the trial balance agree so that the draft accounts can proceed. It should be cleared to nil once errors are located and corrected. It is not a permanent home for unexplained differences, so the second option is wrong.
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