Suspense Account and Journal Entries


A suspense account is a nominal ledger account which is created in two main situations:

  • If the trial balance does not balance the difference is placed in a suspense account; and
  • If the bookkeeper is unsure of the posting of one side of the double entry he may post the debit/credit to the suspense account.

The suspense account is a temporary account.  Once errors are located or the correct double entry has been ascertained the suspense account is cleared out.


After the preparation of a trial balance, an unexplained difference of DR RWF406 remains; a Suspense Account is opened for that amount.  Subsequent investigations reveal:

  • RWF35 received from A. Jalloh and credited to his account has not been entered in the bank account.
  • A payment of RWF47 to M. Strauss has been credited to that account.
  • Discounts allowed (RWF198) and discounts received (RWF213) have been posted to the discount accounts as credits and debits respectively.
  • Bank interest received of RWF111 has not been entered in the bank account.
  • The carriage outwards (RWF98) has been treated as a revenue item.


There are six types of errors which will not affect the trial balance.  These are as follows:

  • The complete omission of a transaction.
  • Posting to the correct side of the ledger but to the wrong account.
  • Compensating errors e.g. if the sales account was added up to by RWF20 too much and the purchases account was also added up to by RWF20 too much, then these two errors would cancel out in the trial balance.
  • Error of principle – where an item is entered in the wrong class of account e.g. if a fixed asset such as a motor van is debited to an expenses account such as the motor expenses account.
  • Errors of original entry – where the original figure is incorrect yet double entry is observed using this incorrect figure.
  • Complete reversal of entries – where the correct accounts are used but each item is shown on the wrong side of the account. Suppose we received a cheque of RWF200 from D. Mare the double entry would be debit bank and credit D.Mare.  In error it is entered as debit D. Mare and credit bank.


 Question – Sam Horak

You act as accountant to Sam Horak.  Mr Horak has requested you draw up the Statement of Comprehensive Income  for previous year’s trading together with Statement of Financial Position.  To this end he supplied you with a trial balance as at 31st December 20X3.  He pointed out, however, that the debit side of said trial balance exceeded the credit side by RWF3,769.48.  To balance the Trial Balance he opened a suspense account on the credit side.

His bookkeeper further investigated and discovered the following discrepancies:

  • Sale of goods to J G Ltd. was posted to sales a/c as RWF990 and not RWF99 as originally recorded in sales day book.
  • A machine was sold on 28th October to Michael Quint. The proceeds were RWF3,700.  The book value of the machine at 28th October was RWF3,970.  Unfortunately when posting the entry to machinery account the proceeds were entered as RWF4,470 and the profit/loss computed accordingly.
  • Purchase of motor vehicle costing RWF3,750 was posted to purchases account.
  • Purchases returns in the sum of RWF350 were posted to the debit side of purchases returns account.
  • RWF760 discounts allowed posted to the credit side of the discounts received account.
  • Bank overdraft in the sum of RWF3,000 was entered on the incorrect side of the trial balance.
  • A trade payable account in the sum of RWF1,765 entered in the incorrect side of the trial balance.
  • Sale of goods in the sum of RWF78,52 was posted in error to the account of John Hugo instead of Ernest Hugo.
  • Goods taken from stock in the sum of RWF1,900 were credited to the sales account only.
  • Purchase of wrapping paper in the sum of RWF210.10 was included in the purchases day book but was not posted to the relevant account in the nominal ledger.

Carriage inwards in the sum of RWF584.71 was entered on the incorrect side of the trial balance.



A Journal, like other books of prime entry, is used to record a transaction prior to its entry in the ledger.  Since the vast majority of transactions are capable of being assigned to one or the other of the day books, the use of the Journal is confined to items such as:

  • Opening and closing entries of the business.
  • Correcting and adjusting entries.
  • The purchase and sale of non-current assets.
  • Transfers from one account to another.

Method of Writing up the Journal

In the Journal, a memorandum is made, in the simplest possible terms, of entries to be made in the ledger.  The essential information consists of: (

  • The date
  • The name of the account to be debited.
  • The name of the account to be credited.
  • The amount of money.
  • A brief description of the transaction.


  • The amount to be debited appears first in the Journal by convention. Note the use of the word “Dr”.
  • Each entry must be accompanied by an explanation called the “narrative”. The narrative should contain full information as to the nature of the transaction and the dates of contracts, minutes, resolutions, etc. giving rise to it, so that the authority for the transaction as well as the origin of the entry will be shown.
  • The folio column should be entered when the transaction is posted to the ledger.
  • Always total up the debit and credit columns, making sure they balance.

Advantages of a Journal

The main advantages to be gained from the use of journals are:

  • The risk of omission of one or both of the entries required for each transaction is reduced. This is particularly important where more than one ledger is kept.
  • More information on the nature of the transaction can be recorded than is possible in the ledger.
  • The journal affords a permanent record of the nature of important transactions which can be referred to in future.


Remember to journalise all important and unusual items.  It is essential that journal entries be written neatly and completely.

Use of Journals Opening Entries:

When either a new set of books is opened or a new business is started, the opening entries in the books are frequently journalised.

Correction of Errors

If an error is made in the books, it is important to remember that the wrong entries should not be deleted from the books, but instead new entries, correcting or cancelling the old, are made.

A journal is usefully employed to achieve this end.

Purchase/Sale of Property, Plant and Equipment

A journal is commonly used to enter the purchases of capital items so that a permanent record of important purchases can be maintained.  This record comes in useful when calculating depreciation and computing tax.

The most common entries are:

  • Purchase of property, plant and equipment on credit/cash.
  • Disposal of property, plant and equipment.
  • Scrapping of property, plant and equipment.

Transferring Items Incorrectly Posted.

The principle here is similar to the correction of errors.

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