what is a suspense account

Use a suspense account when you buy a fixed asset on a payment plan but do not receive it until you fully pay it off. After you make the final payment and receive the item, close the suspense account and open a separate asset account. If the credits in the trial balance are larger than debits, record the difference as a debit. The purpose of a suspense account is to hold amounts that cannot be categorised, so it would not be possible for each department to have a suspense account. If you could identify the department, you would not need to place the payment in a suspense account.

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Example #2: You’re not sure how to classify a transaction

These accounts are used to resolve issues and improve accuracy for accounting purposes. For example, a dispute between departments about who should be charged for a bill may be placed into the suspense account until it is figured out. The money from investors is deposited into this account when making decisions about their investments. what is a suspense account The suspense account is used when a client does not know what to do with the deposit or funds. As the client works to make this decision, the money can stay in this account for a few days as needed. Some jurisdictions have rules and regulations regarding suspense accounts because they are considered a control risk.

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Unknown payment or invoice

Another type of asset suspense account, the entry would be in this section if money had been received but an invoice hadn’t yet been issued. An illustrative example 
Michelle runs a small business and does her own bookkeeping but does not have very much experience in this yet. There have been times throughout the year when Michelle has used a suspense account because she was unsure of the correct accounting treatment.

what is a suspense account

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What type of account is a 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. If the suspense account is showing a balance, it means that some errors still exist. If the Suspense Account shows a debit balance, it is taken to the asset side of the Balance Sheet, whereas if it shows a credit balance, it is taken to the liability side of the Balance Sheet. Suspense accounts in a company’s general ledger typically contain entries where there are uncertainties or discrepancies that need to be resolved.

Move suspense account entries into their designated accounts to make the suspense balance zero. A suspense account is an account where you record unclassified transactions. The account temporarily holds entries while you decide how you will classify them.