What is a Suspense Account? Definition Meaning Example

Despite its mysterious connotations, “suspense” in this case simply refers to the fact that a transaction or its designation in a company’s books has been suspended temporarily, pending some further action. In case Suspense A/c is not closed at the end of the accounting period, the balance in the Suspense A/c is presented in the Balance Sheet. Our writing and editorial staff are a team of experts holding advanced financial designations assets = liabilities + equity and have written for most major financial media publications.

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• It can be a repository for monetary transactions (cash receipts, cash disbursements and journal entries) entered with invalid account numbers.
• The process of resolving entries in a suspense account is methodical, requiring diligent examination of each transaction to determine its rightful place in the financial records.
• To close the suspense account, credit the suspense account and debit the supplies account for the purchasing department.
• Suspense accounts are commonly used when there is no paper trail for the transaction or the nature of it hasn’t been informed yet.
• Instead of this causing confusion or potential errors in your account, the funds are placed into a brokerage suspense account.
• Instead of making rushed decisions that could mess up your books, you can park these mysteries in a suspense account until you figure out where they belong.

When the right account is determined or the error is rectified, the amount shall be moved from the suspense account to its proper account. The suspense account maintains the double entry at the time of posting when the correct account is unknown. Subsequently when the business determines the transaction classification it transfers the amount from the suspense account to the correct account. One important use of a suspense account is to bring the trial balance into agreement.

• He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.
• A business can use a suspense account to record payments it has received but that can’t be properly accounted for until certain missing information (such as an invoice number) is obtained.
• A suspense account is created only to avoid the further delay in the preparation of final accounts.
• A suspense account lets you keep working while you figure out the details.
• Suspense accounts are used for assets or liabilities that require further clarification before they can be assigned a permanent place in the ledger.

Example #2 – Partial Payment

These potentially incorrect financial transactions are either initially recorded in the suspense account, or moved from the general ledger into the suspense account. These accounts are designed to temporarily hold mortgage payments that are either incomplete or cannot be immediately applied to specific portions of the loan, such as principal, interest, taxes, or insurance. The purpose of a suspense account is to temporarily store transactions that cannot be immediately classified into a specific account due to incomplete information or uncertainty. This accounting practice helps in maintaining the accuracy of financial statements while additional information is gathered. For suspense account journal entries, open a suspense account in your general ledger.

You’re preparing a trial balance

As cash has been received, an accounting entry will be recorded in the suspense account until the missing information is provided or obtained. It can be a repository for monetary transactions (cash receipts, cash disbursements and journal entries) entered with invalid account numbers. If one of these conditions applies, the transaction should be directed to a suspense account. While suspense accounts are invaluable tools in accounting for managing transactions that cannot be immediately classified, they also come with their own Food Truck Accounting set of challenges.

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All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. For information pertaining to the registration status of 11 Financial, please contact the state securities regulators for those states in which 11 Financial maintains a registration filing. Let’s suppose you receive a payment from an unknown entity; or the sender is known but you are not sure which suspense account invoice they are paying for. A financial professional will offer guidance based on the information provided and offer a no-obligation call to better understand your situation. This team of experts helps Finance Strategists maintain the highest level of accuracy and professionalism possible.

A suspense account on a balance sheet is a temporary holding place for transactions that are unclear or not ready to be classified into a definitive account. It ensures the balance sheet remains accurate while details are clarified or adjustments are made. Once the nature of a transaction is clarified, the accountant can then move the funds from the suspense account to the appropriate permanent account. This could be any number of specific accounts, such as accounts receivable, revenue, or a liability account, depending on the transaction’s characteristics. The reallocation is typically accompanied by a journal entry that provides a clear audit trail from the suspense account to the final destination in the ledger.