1. Is there any difference between insolvent and bankrupt in law?
2. What is suspense account? why and when it is used in accounting
and what is its tratment?<b></b><font size=6></font id=size6>
khan
<b></b> SUSPENCE ACCOUNT
" A suspence account is an account showing a balance equal to the difference in a trial balance. "
a suspence account is a TEMPORARY ACCOUNT which can be opend for a number of reasons . the most commomn reasons are as floows
a> a trail balance is drawn up which does not balance ( total debits do not equal toal credits ).
b> the bookkeeper of a business knows where to post the credit side of a transaction, but doesnot know where to post the debit ( or vise versa ) . for example, a cash payment might be made and must obviously be credited to cash. but the bookkeeper may not know wht the paymen is for, and so will not know which account to debit.
in both the cases a suspence account is opened uptill the problem is sorted out.....
IN english LAw, a bankrupt is a person who has committed an act of bankruptcy and who has been adjudged a bankrupt. such a person would be said to have committed an act of insolvency and to have been adjudged an INSOLVENT.
regrads.
alee_rulez
Never seek advice from a Chartered Accountant. They are trained to find problems not solutions.
hi mr ali,
thank you so much for answering but still i have some problem.......please explain that if we fail to find the
errors and accounting year ends....what will be its treatment...
ultimately it will go the balance sheet or profit and loss account and what is the nature of suspense account it is of permanent nature
or temorary.......
thanks and salaam
khan
yarr..its nature is temporary..
bcz whn u sun up all the records u'll find where the error occured ...
Never seek advice from a Chartered Accountant. They are trained to find problems not solutions.
hi ali,
yaaar you are right but it's not necessary that we have used the suspense account at the begening of the financial year . we may
need this account at (suppose) 25th december and after few days our
accounting period will be over .......than we will make the final
accounts......so than we have to post this account somewhere either
in the balance sheet or in income statement.so, what we will do?
we can detect the errors but not always in desireable time period.
so this is the problem .......... i hope that you will
reply........
take care
alla hafiz
khan
dont create too much suspense, suspense account never appears in the drafted financial statements...mind it
Ace
insolvency and bankrupcy have the same meanings
Ace
yeah mani is right...suspence account kabhi bhi financial statements mai nahi aata.....
i'll answer u very soon with the help of clear example ..but directly in ur email's INBOX P
bbye regrads
Never seek advice from a Chartered Accountant. They are trained to find problems not solutions.
hi to all,
ali and maani thank you so much for replying .......now i am not confused because i got the point......suspense account goes to the balance sheet because we don,t usually want to close it ........we mostly try our best to find out the error.thats why we put this into the balance sheet and whenever we detect error we pass rectifying entry that close this account.
thank you agian for reply....
.................anyhow ali you can mail me if you have some more points.................
take care........
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