Q.A Suspense Account, opened to make a disagreeing Trial Balance tally provisionally, is properly closed:
(A) by transferring its balance to the Capital Account at the end of the year, whether or not the causing errors have been located
(B) automatically, without any further entries, once the financial year ends
(C) only after every one-sided error responsible for the original difference has been located and rectified through it, leaving it with a nil balance
(D) by transferring its balance to the Profit and Loss Account every year, whether or not the causing errors have been found

This checks whether the student understands that a Suspense Account's closure must be EARNED by genuinely finding the errors — it can never simply be written off.

The correct option is (C).

A Suspense Account is opened purely as a temporary, provisional holding place for a Trial Balance's unexplained difference. As each one-sided error causing that difference is discovered, it is rectified by a journal entry with the Suspense Account on one side; each such entry shrinks the Suspense Account's balance a little further. The account is genuinely closed only when its balance reaches exactly NIL — proof that every error responsible for the original difference has actually been found and corrected, not merely assumed to be found.

Why the other options are wrong:

• (A) and (D) both describe simply writing the balance off to another account (Capital, or Profit and Loss) without having actually traced the underlying error. This is dishonest bookkeeping — it hides a real, unexplained discrepancy instead of resolving it, and directly contradicts the honesty expected in maintaining accurate books. …

Students sometimes believe a Suspense Account balance can simply be transferred to the Balance Sheet permanently as if it were a genuine asset or liability. An unresolved Suspense Account balance is neither — it is an honestly …