Uses of Suspense Account Trial Balance With Examples

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Hold the partial payment in a suspense account until you contact the customer. When you find out the invoice, close the suspense account and move the amount to the correct account. If it’s an asset in question, the suspense account is a current asset because it holds payments related to accounts receivable. A suspense account could also be a liability if it holds accounts payables that you don’t know how to classify. When you open an accounting suspense account, the transaction is considered in suspense.

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This type of account temporarily holds funds or securities until the correct placement of the transactions can be determined. A suspense account is needed because the appropriate account was not determined at the time the transaction was being recorded. As long as a transaction is found in a suspense account and hasn’t yet been transferred to its permanent account, it is placed in the suspense account, acting as its holding account for the transaction. Having a larger number of unreported transactions would mean that it won’t be recorded by the end of the reporting period, resulting in inaccurate financial outcomes.

• Suspense accounts are used by accountants in many different types of situations.
• While other trial balance errors do exist (e.g., error of omission, commission, principle, original entry, reversal of entries), they do not affect the 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.
• A financial professional will offer guidance based on the information provided and offer a no-obligation call to better understand your situation.
• It is used to mitigate risk which is addressed and when the errors are rectified.
• Accurate bookkeeping lies at the center of ensuring efficient financial reporting.

Recording unidentified payments

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Example 1: Trial balance adjustment

• 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.
• If a discrepancy is found, the amount in question may be moved to a suspense account until the source of the error is identified and corrected.
• At the end of the month, his accountant had to reconcile the bakery’s ledgers but there was a bank transaction of $300 that he had no record off.
• For example, if a customer makes a deposit but fails to provide sufficient details for the bank to identify the account, the deposit is placed in a suspense account.
• Payments received for invoices with disputed charges are held in a suspense account until the dispute is resolved.
• A suspense account is a component of a company’s financial accounts that is used to record confusing entries that require additional examination to determine their right classification.
• When the proper account is determined, the amount will be moved from the suspense account to the proper account.

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. As can be seen the original entry to the suspense accounts is reversed, so the balance on the account is zero.

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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. A suspense account is an account suspense account used temporarily to carry doubtful entries and discrepancies pending their analysis and permanent classification. One important use of a suspense account is to bring the trial balance into agreement.

• Brokerage firms also use suspense accounts to, for example, keep track of a customer’s money between the time they sell an investment and when they reinvest that money.
• Customers sometimes make partial payments on monthly loan or credit installments.
• The amount of money held in suspense account is referred to as the “suspense balance.”
• A suspense account is one that temporarily records transactions that have yet to be assigned to their proper accounts.