BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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when a Balance Sheet fails to balance
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when a trial balance fails to balance
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when an error of omission is corrected
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when an error of principle is corrected
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Detailed explanation-1: -When to create Suspense Accounts. 1. During trial balance preparation: A suspense account is useful when the trial balance is being prepared and the debit and credit balance do not match. The difference amount can be transferred to a suspense account.
Detailed explanation-2: -If the trial balance does not agree, difference of the trial balance is placed to suspense account.
Detailed explanation-3: -Suspense account will be shown in the balance sheet either on asset side or liabilities side, depending on the balance of suspense account.
Detailed explanation-4: -As the name suggests, a suspense account is an account that temporarily records amounts that are yet to have their proper accounts determined. In balance sheet terms, a suspense account is not ideal, as it can prevent you from accurately balancing the books.
Detailed explanation-5: -Suspense accounts are the accounts that are prepared when the trial balance does not tally or when there is an unidentified transaction. These are prepared temporarily to avoid delay in preparation of financial statements and are closed when the reasons are deducted or at the end of accounting cycle.