Suspense Account

An accountant was tasked with recording a few journal entries written by a large corporation’s finance director. One transaction’s nature could not be determined at the time of recording. To meet the deadline, the accountant entered the “unclassified” amount into the general ledger suspense account. Customers sometimes make partial payments on monthly loan or credit installments. Partial payments will be entered into a suspense account until the full payment is received.

The suspense account can hold the difference that led to the trial balance not balancing until the discrepancy is rectified. The unclassified transactions temporarily “parked” in this account are a “suspense” that we need to investigate and relocate into their correct accounts accordingly. Instead, it is used to give some leeway to the accountant to find the true nature of some transactions to make the ledger books more robust. Book-keepingBookkeeping is the day-to-day documentation of a company’s financial transactions.

You’re preparing a trial balance

The point is to make sure the credit balance equals the debit balance for each account, explains Lyle Solomon, principal attorney at Oak View Law Group. And if they don’t match, you can record the difference in a suspense account until the issue is resolved. The term “suspense account” can have several different meanings, depending on the context. In the business world generally, a suspense account is a section of a company’s financial books where it can record ambiguous entries that need further analysis to determine their proper classification. In mortgage servicing, the servicer can use a suspense account to park funds temporarily if a borrower has made only a partial payment for that month.

Alternatively, the transaction can be left in the daybook while you consult your accountant or bookkeeper and the correct account can be determined at a later date. A general ledger suspense account is essentially a catch-all account used in many businesses to record unclassified transactions before discerning their designated accounts. This can make it difficult to match up with the invoice, particularly if the customer has multiple outstanding invoices. You don’t want to avoid recording a transaction altogether just because you’re not sure of the correct account to post it to. In that case, you would be unable to balance the accounting books during a reporting period. When you buy a fixed asset on a payment plan but just don’t receive it until you fully pay it off, use a suspense account.

Correct

We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content suspense account examples in oureditorial policy. Janet Berry-Johnson is a CPA with 10 years of experience in public accounting and writes about income taxes and small business accounting.

Amounts subject to legal dispute are also recorded in a suspense account. However, all transactions require complete and accurate information before they can be entered into the financial records. Whether new to BlackLine or a longtime customer, we curate events to guide you along every step of your modern accounting journey. From onboarding to financial operations excellence, our customer success management team helps you unlock measurable value. Through workshops, webinars, digital success options, tips and tricks, and more, you will develop leading-practice processes and strategies to propel your organization forward.

What is a Suspense Account? Types & Examples

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But many companies try to complete this process on a monthly or even quarterly basis. When customer withdrawal completes, the money moves from suspense account to the agent’s account who facilitated the cash withdrawal. A suspense account is always made on the weaker side of the trial balance. So in order to find out the error, you can match the amount in payment with the invoice that you sent to your customers. Furthermore, once you match the payment you must also contact the respective customer and make sure that he/she has made this payment or not.