The Suspense Account That Should Never Have Existed
Adaeze Okonkwo runs a provisions wholesale business in Enugu. On 31 March 2025 her bookkeeper extracted a trial balance whose debit column totalled ₦4,853,700 and credit column ₦4,876,800, and he opened a suspense account for the difference so that the trial balance would agree. He then left without explanation. While preparing the year-end accounts you establish the following: (i) a credit sale of ₦9,800 was correctly entered in the sales day book and credited to the sales account, but was never posted to the customer's account; (ii) rent of ₦6,300 paid by cheque was entered in the cash book only; (iii) discount allowed of ₦3,500 to a customer was entered on the credit side of the discount allowed account instead of the debit side; (iv) stationery costing ₦3,600 was debited to office equipment. The bookkeeper insists that the trial balance 'balances perfectly' and that no further work is needed. Draft profit for the year was ₦2,150,000.
1. Determine which of the four items explain the suspense balance, state the direction of each, and show that the suspense account clears to nil.
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Suspense balance. Credits exceed debits by ₦4,876,800 − ₦4,853,700 = ₦23,100, so the suspense account carries a debit balance of ₦23,100. A debit suspense balance means the ledger debits are, in net terms, ₦23,100 too low.
| Item | Effect on the trial balance | Goes to suspense? |
|---|---|---|
| (i) sale not posted to customer | debit of ₦9,800 missing → debits too low | Yes - credit suspense ₦9,800 |
| (ii) rent not posted | debit of ₦6,300 missing → debits too low | Yes - credit suspense ₦6,300 |
| (iii) discount allowed on wrong side | should be debit ₦3,500 but is credit ₦3,500 → debits too low by ₦7,000 | Yes - credit suspense ₦7,000 |
| (iv) stationery debited to office equipment | both a debit and a credit exist; only the account is wrong | No |
₦9,800 + ₦6,300 + ₦7,000 = ₦23,100, exactly the suspense balance, so the suspense account is cleared to nil.
Item (iii) is the one candidates get wrong: the error is worth twice the amount of the discount, because a credit of ₦3,500 has to be removed and a debit of ₦3,500 put in its place. Item (iv) is a classification error within the debit side - total debits are unchanged, so the trial balance was never affected by it.
2. Prepare the journal entries to correct all four items and explain why item (iv) does not pass through the suspense account.
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| # | Dr | Cr | Amount |
|---|---|---|---|
| (i) | Trade receivables | Suspense | 9,800 |
| (ii) | Rent expense | Suspense | 6,300 |
| (iii) | Discount allowed | Suspense | 7,000 |
| (iv) | Stationery expense | Office equipment | 3,600 |
The three suspense entries total ₦23,100 on the credit side, which exactly cancels the debit balance of ₦23,100 in the suspense account. Nothing remains in suspense.
Item (iv) requires no suspense entry because the double entry was complete - ₦3,600 was debited somewhere and ₦3,600 was credited somewhere. What was wrong was the account chosen on the debit side. Correcting it is a straight reclassification between two asset/expense accounts; the suspense account was never involved, and forcing the entry through suspense would create a new error in the trial balance rather than remove one.
3. Recompute profit after the corrections and state what you would say to the bookkeeper.
Read the worked answer
| Item | ₦ |
|---|---|
| Draft profit | 2,150,000 |
| (i) sale not posted to customer | nil - sales were already credited |
| (ii) rent omitted from rent account | (6,300) |
| (iii) discount allowed on wrong side (₦3,500 × 2) | (7,000) |
| (iv) stationery wrongly capitalised | (3,600) |
| Corrected profit | 2,133,100 |
Item (i) has no profit effect: the credit to sales is already in the ledger, only the customer's account is short. Item (iii) reduces profit by ₦7,000, not ₦3,500, because the draft accounts contain a ₦3,500 credit to an expense account that must be replaced by a ₦3,500 debit.
To the bookkeeper: a trial balance that agrees proves only that total debits equal total credits. It does not prove the ledger is correct. Every error in items (i)–(iii) was a one-sided error that should have been trapped by the trial balance; if a suspense account was needed, the control accounts and the day-book totals should have been checked before the accounts were closed.