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CMA Foundation · Fundamentals of Financial and Cost Accounting · Trial Balance

Which statement about a Suspense Account is correct under the usual treatment taught at CMA Foundation level?

Once all the errors behind the trial balance difference are located and rectified, the Suspense Account should show a nil balance. It is only a temporary holding account, not a nominal account, so it is not a permanent capital item or an expense of the period.

  1. AIt is a nominal account closed to the Profit and Loss Account at year-end
  2. BOnce all the errors are located and rectified, it should show a nil balanceCorrect
  3. CIt is shown under the capital in the Balance Sheet permanently
  4. DA debit balance in it is treated as an expense of the period

Explanation

The Suspense Account is a temporary account opened to hold a trial balance difference until the errors are found. When all errors are located and rectified, the account is cleared and shows nil. It is not a nominal account, and an unresolved balance is shown in the Balance Sheet, not treated as an expense.

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