What is a Suspense Account? Examples Included

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• If your business experiences a high rate of change in its accounts, though, it is best practice to close the suspense account periodically and transfer all uncorrected entries to their respective ledger accounts.
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• For example, if your company’s opening ledger has account numbers 1-98, the next account number available to your business will be 100.

Make the most of your team’s time by automating accounts receivables tasks and using data to drive priority, action, and results. If the cash came from the sale of an asset and couldn’t determine precisely which one it was, the entry would be in the asset suspense account. Despite this, Lobek and her bookkeeper do manage to round up any unidentified transactions and move them from suspense to the main accounts. “We would recommend keeping track of suspense items within a control account in your accounting software,” says Alice Pearce, Senior Client Advisor at Wilson Partners accountancy firm. Sales returns for goods sold on credit in September 20X8 of $8,980 were accidentally recorded by processing a sales invoice.

Why is a suspense account important?

You get up to 54 days to clear your Card balance, so you can keep your money in the account for longer¹. For an accountant to show a suspense account on balance sheet documents is more direct than it seems, because it isn’t much different from other accounts. For instance, if the accountant or the owner isn’t sure which account to place a transaction into, then it’ll be moved to the suspense account for the time being. 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. An accountant was instructed to record a significant number of journal entries written by the controller of a large company.

• As you can see, there is now a nil balance carried forward in the suspense account.
• Keeping an up-to-date record and regularly reviewing your suspense account will help you make sure all is well when it comes to reporting your finances.
• In another scenario, a customer might make a payment but fail to specify which of several outstanding invoices they intended to pay off with those funds.
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To close the suspense account, credit the suspense account and debit the supplies account for the purchasing department. You might be unsure about which department of your business to charge, so you place the amount in a suspense account. If you’re unsure about where to enter a transaction, open a suspense account and talk to your accountant.

You received a partial payment

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Example 1: Unknown Payment

Similar to the other types of suspense accounts, brokerage suspense accounts temporarily hold funds while transactions are completed. A suspense account may also be established if further information is needed to finalize the transaction or if there are other complications that need to be resolved. An account used to temporarily hold transactions for which it is unclear where they should be recorded is a suspense account. The transaction is capital employed formula calculation and examples moved out of the suspense account and into the appropriate account(s) once the accounting staff has looked into and clarified the purpose of this kind of transaction. If the source of an expense or revenue is unknown, you can also place a transaction into a suspense account. This may happen if there is an invoice or receipt for a sum of money without a description of the goods or services that generated the expense or generated the payment.

Which account number should I use for my suspense account?

Pearce stresses that the suspense account is supposed to be temporary, allowing you to continue working on accounts without losing any information. As soon as you find out what the transaction was, it must be moved from the suspense account into its correct place on the ledger. One rogue entry into your accounting software will at best disrupt your financial reporting and at worst cost your business money. Consider the example Trial Balance above, which contains a $24,000 debit in the form of a suspense account.

Once the accounting staff investigates and clarifies the purpose of this type of transaction, it shifts the transaction out of the suspense account and into the correct account(s). The correctness of ledger accounts is not always demonstrated by a trial balance. There may be inaccuracies even though the sum of the credits and debits match. Suspense accounts in the Journal Proper can be used to fix such problems. A suspense account is an account in the general ledger used to temporarily store transactions that require further analysis and rechecking before a permanent version can be made in the record books. It’s an account where you can make ambiguous entries until you find where those funds came from or receive full payment from a client.

You and your client can make sure the right people are sending and receiving payment by using a suspense account for transactions with obscure senders. Businesses also use a suspense account to record transactions when there are delays between the receipt of money and the proper assignment in the ledger. For example, money may be transferred to a bank but not deposited into an account, or when money is received by a customer before a policy or contract is written. Customers sometimes make partial payments on monthly loan or credit installments. Partial payments will be entered into a suspense account until the full payment is received. BlackLine and our ecosystem of software and cloud partners work together to transform our joint customers’ finance and accounting processes.