Question

Define suspense account and discuss its utility

Answer 1

Answer:

A suspense account is an account used to temporarily store transactions for which there is uncertainty about where they should be recorded. Once the accounting staff investigates and clarifies the purpose of this type of transaction, it shifts the transaction out of the suspense account and into the correct account(s).

Explanation:

Answer 2

Suspense account-

A suspense account is an account used to temporarily store transactions for which there is uncertainty about where they should be recorded.

Utility of suspense account-

1. Helps in Preparation of Trial Balance:When trial balance does not agree, in that case the amount of difference can be put on the shorter side of the trial balance as ‘Suspense Account’ and thus, the trial balance stands closed.
2. Helps in Locating the Errors:The amount of Suspense Account helps to locate the errors because with the amount of Suspense Account, the accountant can find the errors committed in the past.
3. Helps in Judging the Nature of Errors:The balance of Suspense Account helps the accountant to locate the errors because the balance (debit or credit) helps the accountant to determine the possible head of account in which error might have been committed.

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Explanation:

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