Explanation

When there is a difference in the trial balance that cannot be immediately located, the difference is posted to a suspense account. This is a temporary account used until the error is found and corrected.

The trial balance should balance – total debits should equal total credits. If they do not, there is an error somewhere. Rather than delay preparing financial statements, accountants open a suspense account to hold the difference temporarily.

For example, if debits exceed credits by ₦500, a suspense account is credited with ₦500 to make the trial balance balance. When the error is found, the suspense account is cleared through a correcting entry.

Control accounts are used to summarize subsidiary ledgers. Profit and loss account shows income and expenses. Profit and loss appropriation shows how profits are distributed. None of these are used for holding unlocated differences.