Suspense Account Overview & Examples What is a Suspense Account?

Also, enter the same amount with an opposite entry in another account. In accounting for small business, most suspense accounts are cleared out on a regular basis. Move suspense account entries into their designated accounts to make the suspense balance zero. All suspense account items should be eliminated by the end of the fiscal year.

Whether intentional or accidental, partial payments can be tricky to match up to invoices. You can hold them in a suspense account until you know which account they should move to. A suspense account is a general ledger account in which amounts are temporarily recorded. The suspense account is used because the appropriate general ledger account could not be determined at the time that the transaction was recorded. Similar to the other types of suspense accounts, brokerage suspense accounts temporarily hold funds while transactions are completed.

What type of account is a suspense account?

After moving the entry to the correct permanent account, close the account. The purpose of the suspense account is to temporarily hold the transactions that are in question and not suspense account to affect the trial balance. Once the error is identified and corrected, the transactions are then reclassified to the appropriate account and the suspense account is closed.

Suspense accounts are important in accounting because they help filter out transactions that cannot be identified at the time of recording. These accounts work as a temporary location to store unknown transactions, and once the amount is determined correctly, it can be moved to the regular ledger account. 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.

Suspense account example

After which, they need to debit the suspense account and credit the accounts payable. Once the department has been specified, the accountant or management will be able to quickly bill that department. Finally, for the buying department to complete the transaction, the accountant will credit the suspense account https://www.bookstime.com/ and debit the supply account. The main purpose of setting up a suspense account is to keep track of temporary transactions that have not yet been posted to the ledger account. These temporary transactions are “suspended” or held in suspense until they can be identified with a specific ledger account.