Uses of Suspense Account Trial Balance With Examples

The bookkeeper is unsure whether to debit the office machines account or the electronic appliances account. My Accounting Course  is a world-class educational resource developed by experts to simplify accounting, finance, & investment analysis topics, so students and professionals can learn and propel their careers. Each week he purchases some of the materials needed to manufacture the bakery’s products and he pays for them with the company’s debit card.

Usage: What Are Suspense Accounts Used For?

If there are discrepancies in the amounts paid or received, these funds may be placed in a suspense account until the issues are resolved. This practice ensures that all the funds are accounted for accurately, and it also prevents future disputes. A suspense account is used to temporarily record transactions that lack the normal, detailed information that accountants require to make proper journal entries into the business’s accounting records. Adjusting Entries are used to correct mistakes, whereas suspense accounts are useful for temporarily holding transactions until there is enough information to post them.

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Double Entry Bookkeeping is here to provide you with free online information to help you learn and understand bookkeeping and introductory accounting. Additionally, covering 100% of GL accounts the Substantiation module provides a summary of the unreconciled items, enabling organizations to proactively take corrective actions in real-time. Let’s suppose you receive a payment suspense account from an unknown entity; or the sender is known but you are not sure which invoice they are paying for. When you access this website or use any of our mobile applications we may automatically collect information such as standard details and identifiers for statistics or marketing purposes. You can consent to processing for these purposes configuring your preferences below.

• You can secure access to your primary balancing segment values only with data access sets.
• For efficiency purposes, it is also helpful to track and analyze the entries over time to minimize the reoccurrence of any transactions that cause frequent unnecessary postings into the suspense account.
• Suspense accounts on balance sheets are not desirable since they might make it difficult to balance the books appropriately.
• Both suspense accounts and clearing accounts are used to temporarily record transactions, until they can be permanently assigned.
• Otherwise, a company is issuing financial statements that contain unidentified transactions, and which are therefore incorrect.
• Hold the partial payment in a suspense account until you contact the customer.

Handling partial payments

Any amount that is posted to the suspense account should be there on a temporary basis only, as this amount needs to be investigated and posted to the correct account. Because transactions in a suspense account are unallocated, the account should be considered temporary. For example, payments may be received with invalid or unclear account information. Other details may also be unclear, such as the amount of the transaction or the payee. Once the accountant has enough information, they can reassign the transaction out of the suspense account and into the appropriate account within the general ledger. If there is credit balance in suspense a/c, it is shown on asset side of balance sheet.

• If an expense is incurred, the benefit of which is received by more than one account, such an expense can temporarily be placed in a suspense account.
• In these situations, the transaction will be entered into the suspense account until more information, such as an invoice, is gathered and the transaction can be correctly assigned.
• It can also be used when there is a difference between the debit and credit side of a closing or trial balance, as a holding area until the reason for error is located and corrected.
• In branchless banking (BB) – banking through mobile for the unbanked – these accounts are used for ‘money-in-transit’.
• The suspense account is used because the appropriate general ledger account could not be determined at the time that the transaction was recorded.
• These payments may often lack specific details, making it hard for them to be accurately recorded.
• As soon as possible, the amount(s) in the suspense account should be moved to the proper account(s).

It is not specific to any one type of balance and can contain both debits and credits depending on the nature of the transactions it holds. In accounting for small businesses, most suspense accounts are cleared out on a regular basis. Move suspense account entries into their designated accounts to make the suspense balance zero. Both suspense accounts and clearing accounts are used to temporarily record transactions, until they can be permanently assigned. Suspense accounts, however, are more typically used when there is some question about the transaction that needs to be resolved. 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.

Difficulty in tracking and reconciliation

A suspense balance refers to the total amount of money temporarily held in a suspense account. This account is used to park funds or transactions that cannot immediately be classified into the correct accounting category due to incomplete information or uncertainty. 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. Here are four common scenarios where suspense accounts are utilized, each presented with detailed journal entries to illustrate the proper accounting practices.

For instance, at ABS, a discrepancy of $500 was discovered between credits and debits. While the accounting team reviewed transactions to identify errors or unaccounted items, they temporarily opened a suspense account to balance the books and ensure the accuracy of their financial reporting. Similar to the other types of suspense accounts, brokerage suspense accounts temporarily hold funds while transactions are completed. A suspense account may also be established if further information is needed to finalize the transaction or if there are other complications that need to be resolved. Suspense accounts in a company’s general ledger typically contain entries where there are uncertainties or discrepancies that need to be resolved.

The use of a mortgage suspense account helps ensure that payments are not misapplied or remain unaccounted for while processing. It serves as a safeguard that keeps funds in a known location until all the details can be sorted out and the payments can be accurately applied to the mortgage as intended. For suspense account journal entries, open a suspense account in your general ledger. You might receive a partial payment from a customer and be unsure about which invoice they’re paying.

• This ensures payments are applied correctly, preventing potential servicing errors.
• Once the department has been specified, the accountant or management will be able to quickly bill that department.
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• The use of a mortgage suspense account helps ensure that payments are not misapplied or remain unaccounted for while processing.
• Suspense accounts are temporarily classified as a balance sheet account, usually under the heading of current assets or current liabilities depending on the normal balance.