(a) A Suspense Account is a temporary account into which any amount in respect of a transaction whose source is unknown is placed, pending investigations.
orA Suspense Account is a temporary account into which the difference in a trial balance totalsis recorded pending the location and correction of the errors.
(b)(i)Differences between Provisions and Reserves:Provisions Reserves
i. They are charges against profit. i. They are appropriations of profits.
ii. They cannot be estimated accurately. ii. They are specific amounts set aside ofprofits.
iii. They are designed to provide for knownliabilities. iii. They are not designed to meet any knownliability.
iv. They reduce the capital of the business. iv. They form part of the business capital.
v. They are meant for a specific purpose. v. They may be used for specific or generalpurposes.
(b)(ii) Differences between Expenses and RevenueExpenses Revenue
i. They are outflows in economic benefits arising from the ordinary operating activities of an organization. i.. They are inflows of economic benefits arising from the ordinary operating activities of an organization.
ii. They result in increases in liabilities or decreases in assets. ii. They result in increases in assets or decreases in liability.
(c) (i) Capital reserves- These are amounts made out of capital profits which are not available for distribution as dividend.
They are funds created to finance long term projects or write off capital expenses.
(ii) Revenue reservesThese are amounts usually available for distribution through the Profit and Loss;
These are amounts set out of profits and are available for distribution as dividend;
These are sums of money retained in business, so as to meet future contingencies.
They are amounts set aside to improve the financial position of the entity.
