What Is a Suspense Account?

Please note that some information might still be retained by your browser as it’s required for the site to function. Debitoor also has an ‘Other Income’ option, where you can place income that cannot be matched to an invoice. Deposits or withdrawals are made for transactions that are yet to be completed.

• 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.
• Suspense accounts help you avoid recording transactions in the wrong accounts.
• For information pertaining to the registration status of 11 Financial, please contact the state securities regulators for those states in which 11 Financial maintains a registration filing.
• 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.
• When the proper account is determined, the amount will be moved from the suspense account to the proper account.

The bookkeeper is unable to balance the company’s trial balance, with the credit column exceeding the debit side by $500. A customer paid $1,000 in cash without specifying which invoice the payment relates to. No, unlike mortgage escrow accounts, the money in a mortgage suspense account doesn’t earn any interest for the borrower. Someone on our team will connect you with a financial professional in our network holding the correct designation and expertise. The bookkeeper is unsure whether to debit the office machines account or the electronic appliances account. Later, when they receive more information, they can transfer the entry from the suspense account to the correct account.

Classification of Suspense Accounts

Otherwise, a company is issuing financial statements that contain unidentified transactions, and which are therefore incorrect. If you’re unsure about where to enter a transaction, open a suspense account and talk to your accountant. In the business world generally, a suspense account is a section of a company’s financial books where it can record ambiguous entries that need further analysis to determine their proper classification. 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. A suspense account is a general ledger account prepared in the following situations;1.

This closes out the suspense account and posts the transaction to the correct account. Remember to consider issues like an inaccurate recording of funds (for example, money going into the cash account and not the sales account) and unrecorded expenses, which can be traced back to their invoices. In any case, every effort should be made to eliminate all unidentified transactions held in the suspense account by the end of the fiscal year, otherwise the annual financial statements will be inaccurate. If the credits in the trial balance exceed the debits, record the difference as a debit–and vice versa–to make both columns of the trial balance report balance.

Assets not yet received

Such unexplained sums will not be left in transactions which have already been established. The suspense account offers them a temporary position before proper placement is possible. An illustrative example 
Michelle runs a small business and does her own bookkeeping but does not have very much experience in this yet.

• If it’s an asset in question, the suspense account is a current asset because it holds payments related to accounts receivable.
• A suspense account is an account used temporarily to carry doubtful entries and discrepancies pending their analysis and permanent classification.
• Double Entry Bookkeeping is here to provide you with free online information to help you learn and understand bookkeeping and introductory accounting.
• Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping.
• When it comes to your transactions, automatic bank reconciliation can help you match your payments in an instant.
• Finally, all suspense account items should be researched and eliminated by the end of the fiscal year.