What Is a Suspense Account? Examples and How to Use

If so, the liability suspense account is classified as a current liability. Regularly review the items in a suspense account, with the objective of shifting transactions into their appropriate accounts as soon as possible. Accordingly, there should be a daily measurement of the balance in the suspense account, which the controller uses as the trigger for ongoing investigations. When you record uncertain transactions in permanent accounts, you might have incorrect balances. Suspense accounts help you avoid recording transactions in the wrong accounts.

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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. Close the suspense account and open a separate asset account once you’ve made the final payment and received the item. The Suspense Heads are to be cleared by (-) Debit or (-) Credit as the case may be on receipt of the relevant details/information. nature of suspense account Some jurisdictions have rules and regulations regarding suspense accounts because they are considered a control risk. Therefore, it is vital to have a process in place to clear out the suspense account on regular basis so that all of the suspense account entries are moved into their designated accounts to zero out the suspense balance.

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You have no idea who is sending you money

You might receive a partial payment from a customer and be unsure about which invoice they’re paying. 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. List the suspense account under “Other Assets” on your trial balance sheet. After you make corrections, close the suspense account so that it’s no longer part of the trial balance. If it’s an asset in question, the suspense account is a current asset because it holds payments related to accounts receivable.

Emilie is a Certified Accountant and Banker with Master’s in Business and 15 years of experience in finance and accounting from large corporates and banks, as well as fast-growing start-ups. This is because unallocated transactions get more difficult to reconcile with passing time, especially if there is insufficient documentation, and the account balance could grow uncontrollably. Let’s suppose you have been alerted that a remittance someone sent you from abroad is ready for withdrawal.

Balance of Suspense Account

Let us make in-depth study of the meaning, utility and preparation of suspense account. (iii) Cash Rs.390 received from Geetha, though entered in the cashbook had not been posted to Geetha’s a/c. My Accounting Course  is a world-class educational resource developed by experts to simplify accounting, finance, & investment analysis topics, so students and professionals can learn and propel their careers. In this article, we will learn about the balance of Suspense Account, the use of a suspense account and examples of suspense account. A customer paid $1,000 in cash without specifying which invoice the payment relates to.

Most companies clear their suspense accounts on a monthly or quarterly basis. A suspense account is an account in the general ledger in which amounts are temporarily recorded. A suspense account is used when the proper account cannot be determined at the time the transaction is recorded.