What is a Suspense Account? F&A Glossary

suspense account examples

An accountant was asked to record a few journal entries written by the finance head of a large corporation. There was one transaction whose nature could not be ascertained at recording. The accountant recorded the “unclassified” amount in the general ledger suspense account to complete the assignment by the deadline.

  • Suspense accounts are considered as general ledger accounts and can either be an asset or a liability depending on the transaction.
  • There was one transaction whose nature could not be ascertained at recording.
  • The suspense account is used in this scenario when only partial payments are received.
  • The simple answer is opening the suspense account and recording the cash.
  • It might be because the account number is missing, for instance, or written down incorrectly.

Many businesses will record a payment in a suspense account if there is a question about where to apply it in the general ledger. A mortgage servicer may also use a suspense account to hold a partial payment until it receives the remainder of the mortgage payment. Brokerage suspense accounts are often used to temporarily hold money until an investment transaction is completed.

What Is a Suspense Account? How It Works, Types, and Example

You also avoid failing to record a transaction because of missing information. AccountDebitCreditSuspense Account1,000Accounts Payable1,000Later, you decide to bill the supplies account of the purchasing department. To close the suspense account, credit the suspense account and debit the supplies account for the purchasing department.

The purpose of suspense account entries is to temporarily hold uncategorized transactions. Close the account after moving the entry to the correct permanent account. Regardless of the issues in question, suspense accounts are cleared out once the problem is addressed, at which time the funds are promptly re-shuffled to their correctly designated accounts. At that point, the suspense account should achieve a balance of zero dollars. While there is no definitive timetable for conducting a clearing-out process, many businesses try to regularly accomplish this on a monthly or quarterly basis. Let’s assume the debit side of your trial balance goes higher than the credit side, the difference is recorded as a credit to the suspense account.

Examples of Accounting for Suspense Accounts

This keeps uncategorized transactions separate from categorized transactions. In some instances, the borrower divides their monthly payment in two, thereby making a partial payment. Here, the mortgage servicer can use suspense account transactions to deposit the first half of the payment.

suspense account examples

It’s no longer a matter of whether or not to digitally transform. Standardize, accelerate, and centrally manage accounting processes – from month-end close tasks to PBC checklists – with hierarchical task lists, role-based workflows, and real-time dashboards. The suspense account examples suspense account may be used when other issues occur with a payment, such as incorrect information or a technical problem with the transaction. Some jurisdictions have rules and regulations regarding suspense accounts because they are considered a control risk.

What is suspense account in accounting (definition, explanation, example, and uses)

If one of these conditions exist, the transaction should be directed to a suspense account. She is a Business Content writer and Management contributor at 12Manage.com, where she contributes a business article weekly. She has over 2 years of experience in writing about accounting, finance, and business. The difference in trial balance is temporarily transferred to suspense a/c. As 50,000, It is however correctly recorded in the cash account.

suspense account examples

Our team of reviewers are established professionals with decades of experience in areas of personal finance and hold many advanced degrees and certifications. At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content. It generally clears charges regularly to set the balance back to zero. It allocates funds until they are placed into the correct account. It allows the business to stay organized by separating unknown transactions.

What type of account is a suspense account?

What type of account is a suspense account? 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.

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