What is a Suspense Account? Definition & Examples
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It helps to strengthen the processes and makes it simpler to recognise similar products in the future, hence keeping them out of the account. As such, having the account presented on financial statements with a remaining balance may be viewed negatively by outside investors. Therefore, suspense accounts should be cleared by the end of each financial period. The suspense account stores unclassified or unknown money that is not linked to a set account.
Brokerage firms also use suspense account accounts to park client funds after securities are sold and the client isn't sure about what to do with the proceeds. Most accountants clear out suspense accounts on a monthly or cyclical basis, which will give them a zero balance. Because it's only a temporary account, it's not good to leave unidentified transactions in suspense for too long. A balance in a suspense account for an extended period is a sloppy way to manage transactions and violates accounting principles. The nature of accounting is to properly identify all transactions and code them to the right accounts, not leave them floating in an suspense account.
Definition of Suspense Account
Link controls to related https://www.bookstime.com/s, narratives, and projects, and ensure version control. Nupur paid ₹2,500, but her account was wrongly credited with ₹4,500.
Is suspense a liability or expense?
A suspense account is a holding account found in the general ledger. Depending on the transaction in question, a suspense account can be an asset or liability. If it's an asset in question, the suspense account is a current asset because it holds payments related to accounts receivable.
A customer paid an outstanding $1,000 invoice in two partial payments of $500. The suspense account can hold the difference that led to the trial balance not balancing until the discrepancy is rectified. Another instance in which having a suspense account comes in handy is when a trial balance is out of balance, meaning the debit and credit columns do not match.
Suspense Account Overview & Examples
An accountant was instructed to record a significant number of journal entries written by the controller of a large company. Unfortunately, there was one amount that did not have an account designated. In order to complete the assignment by the deadline, the accountant recorded the "mystery" amount in the general ledger Suspense account. When the controller is available, the accountant will get clarification and will move the amount from the Suspense account to the appropriate account. Sometimes, you don’t have all the necessary information for accounting. Missing or incorrect details can derail your bookkeeping efforts, but you need to record every transaction. Use a suspense account when you’re not sure where to record general ledger entries.
The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. This is because unallocated transactions get more difficult to reconcile with passing time, especially if there is insufficient documentation, and the account balance could grow uncontrollably.
