[amp_mcq option1=”Income” option2=”Expenditure” option3=”Liabilities” option4=”Assets” correct=”option3″]
The correct answer is: C. Liabilities
A suspense account is a temporary account used to record transactions that are not yet fully understood or classified. It is a liability account because it represents money that the company owes to someone else.
Income is money that a company earns from its business activities. Expenditure is money that a company spends on its business activities. Assets are resources that a company owns and that have value.
Here are some examples of transactions that might be recorded in a suspense account:
- A customer pays the company for goods or services, but the company has not yet received the payment.
- The company receives a bill from a supplier, but the company has not yet recorded the bill.
- The company sells goods or services, but the company has not yet recorded the sale.
The suspense account is used to track these transactions until they can be properly classified and recorded in the company’s financial statements. Once the transactions are fully understood and classified, they are transferred out of the suspense account and into the appropriate account in the company’s general ledger.