If the difference in the trial balance is not quickly located, it is usual to put the difference to suspense account in order to make the trial balance balanced.

• If the debit side is short, the suspense account will be debited saying “To differences in trial balance” and

• Similarly, the suspense account will be credited if the credit side is short.

• The difference in the trial balance is due to type of mistakes which affect only one account such as wrong posting of an account, mistake in totalling a subsidiary book etc. Such types of mistakes are only reflected in suspense account.


When the difference in trial balance is put to suspense account the account to be corrected will be debited or credited as the case may be and the journal entry will be completed by crediting or debiting the suspense account. When all the mistakes have been corrected, the suspense account will show no balance.


CORRECTION IN THE NEXT TRADING PERIOD:-- Since it is necessary to ascertain the profit or loss of each period separately, it would be necessary to rectify errors in such a way as not to affect the current year's expenses, losses or incomes. To take an example, if an error committed in 2001-2002 is rectified in 2002-2003 by debiting purchase account, it would mean that it would be treated as expenditure for 2002-2003. This would be wrong and (proper way is to leave the purchase account and all other nominal account for 2002-2003 unaffected by cm n 2001-2002.


For this purpose, a separate account, profit and loss adjustment account, should be opened and all debit and credit in respect of nominal accounts for errors committed in previous trading period should be passed through that account. The balance of this account is finally transferred to the capital account.


          Distinction between Error of Principal and Error of Omission


Errors of Principal

Errors of Omission

• This error does not affect Trial Balance,

• This error is due to wrong classification of Capital and Revenue expenditure or personal and nominal account

• This is not a clerical error.

• This error affects profit of the business.

• This error will affect value of asset or liability

• This error may affect Trial Balance

• This error is due to complete omission of a transaction or partial omission

• This is a error may or may not affect profit of the business.

• This error may or may not affect value of assets or liability

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