A suspense account is a temporary account opened when the total debits and total credits in a trial balance do not agree, and the exact cause of the difference cannot be found immediately. The difference between the two totals is placed in the suspense account so that the trial balance balances, allowing the accountant to proceed with preparing draft final accounts while the underlying error is investigated further.
Once the error (or errors) causing the imbalance is located and corrected through the appropriate journal entries, the suspense account is cleared to zero and closed. It therefore exists purely as a temporary holding place to make the trial balance agree, not as a permanent record of sales, purchases, or a substitute for the balance sheet.
Recording sales and recording purchases are handled by the sales and purchases accounts respectively, using entries generated by actual trading transactions, and preparing the balance sheet is a separate step of summarising ledger balances once they are all correct; none of these is the function of a suspense account.
Whenever a trial balance fails to balance and the error cannot be traced immediately, opening a suspense account for the difference, then investigating and correcting the error afterward, is the standard procedure to remember.
