Then, we close the account after making the necessary adjustments so that it’s no longer part of the trial balance. Sometimes, accounting teams don’t have all the necessary information for a particular transaction. The double-entry bookkeeping requires the balance sheet https://www.bookstime.com/calculating-retained-earnings to ensure that the sum of its debit side is equal to the credit side total. A general ledger helps to achieve this goal by compiling journal entries and allowing accounting calculations. It helps ensure that all the transactions are recorded under the correct heads.

To close the suspense account, credit the suspense account and debit the supplies account for the purchasing department. Just like the mortgage suspense account, investors keep their money in this account until such time that they are ready to purchase new investments. Suspense accounts are considered as general ledger accounts and can either be an asset or a liability depending on the transaction.

Uses of Suspense Account

If one of these conditions applies, the transaction should be directed to a suspense account. Having an outstanding balance in a suspense account does not generally reflect well on a business’s financial statements. A suspense account is considered temporary, and all transactions should eventually be journaled into a different account. An accountant was instructed to record a significant number of journal entries written by the controller of a large company.

• Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years.
• Deposits or withdrawals are made for transactions that are yet to be completed.
• Brokerage suspense accounts act as funds for investors who are planning to reinvest their money and are yet to decide which investments they wish to go ahead with.
• A company generates many transactions over the course of its operations.

You are not an accountant, but rather the owner of a small business. If you’re not sure where to enter a transaction, set up a suspense account and consult with your accountant. A suspense account is an account used temporarily to carry doubtful entries and discrepancies pending their analysis and permanent classification. Because transactions in a suspense account are unallocated, the account should be considered temporary. Transactions that are booked before an allocation is made to the appropriate cost or profit center will be recorded in the suspense account until they can be properly assigned.

Suspense Account, What Is a Suspense Account? with Examples

The bookkeeper is unsure whether to debit the office machines account or the electronic appliances account. Another example would be if a company makes a payment towards their vendors but the vendor has provided the wrong bank details. GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments. Amounts subject to legal dispute are also recorded in a suspense account.

Suspense accounts are also used by lenders, such as mortgage providers, when borrowers accidentally or intentionally break up their regular payment obligations. Let’s suppose you have been alerted that a remittance someone sent you from abroad is ready for withdrawal. Until you actually make the withdrawal from the agent or financial institution, the remittance money may be stored in their suspense account. Emilie is a Certified Accountant and Banker with Master’s in Business and 15 years of experience in finance and accounting from corporates, financial services firms – and fast growing start-ups. A suspense account with a balance means that there are funds within the account.

The Advantages of Using a Separate Payroll Banking Account

The suspense account can have a debit or a credit balance, depending on which side the trial balance is short. Another instance in which having a suspense account comes in handy is when a trial balance is out of balance, meaning the debit and credit columns do not match. When the business receives a payment that it does not know how to categorize, the transaction is temporarily placed in the suspense account. The suspense account stores unclassified or unknown money that is not linked to a set account.

These accounts are generally cleared out regularly, creating a zero balance in the account. The amount of money held in suspense account is referred to as the “suspense balance.” There are several situations for holding an entry in a suspense account. The suspense account articles and research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.