suspense account

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.

This situation can arise when a small business owner or senior executive is unsure how to classify a transaction. If this is the case, they might create a suspense account before they receive aid from their accountant. If the person in charge is unclear which department of their company should be charged, they can temporarily store this sum in a suspense account.

More Definitions of Suspense Accounts

It is recommended practice to erase all things in a suspense account at the end of the fiscal year, or otherwise the company may issue statements that may contain unidentified transactions, which could lead to mistakes in the statement. A temporary account in which entries of credits or charges are made until their proper disposition can be determined. If you have taken over the accountancy for a company and they have a suspense account it is important to ensure that these amounts are explained, identified, and finally removed and placed in the correct account. When customer withdrawal completes, the money moves from suspense account to the agent’s account who facilitated the cash withdrawal.

Errors are rectified by debiting the correct account and crediting the Suspense account. Similarly, when a correct account is credited, the Suspense account is debited. When all the rectified entries are recorded into a suspense account, it should not be left with any balance.

Multiple Suspense Records for a Policy

It can also be used when there is a difference between the debit and credit side of a closing or trial balance, as a holding area until the reason for error is located and define suspense account corrected. From an accounting perspective, suspense accounts are used to reconcile the ledgers in the occasion that the nature of one or more transactions is unclear.

• The suspense account is used as a place to temporarily hold unclassified funds while the company decides where to put them permanently.
• Drive visibility, accountability, and control across every accounting checklist.
• Does not generally reflect well on the overall health of the business.
• For efficiency purposes, it is also helpful to track and analyze the entries over time to minimize the reoccurrence of any transactions that cause frequent unnecessary postings into the suspense account.
• Most business suspense accounts involve receivables and payables, like the examples above, but there are also other uses for suspense accounts.