After all errors causing a trial balance difference have been rectified, what should normally happen to the suspense account?
Correct answer: C. It should have a nil balance after correction
- A. It should retain a debit balance for future adjustments
- B. It should retain a credit balance as a control account
- C. It should have a nil balance after correction
- D. It should be transferred to the capital account
Explanation
A suspense account is temporary and holds the unexplained trial balance difference. Once every related error is corrected, its debit and credit entries should balance and its closing balance should be nil.
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About Correction of Errors and Suspense Accounts
Accounting errors are corrected by journal entries after identifying whether the mistake affects one account or both sides of double entry. Suspense accounts temporarily hold an unexplained trial balance difference and must be cleared, while errors of omission, commission, principle, original entry and reversal require different corrections.
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