When you record uncertain transactions in permanent accounts, you might have incorrect balances. Suspense accounts help you avoid recording transactions in the wrong accounts. You also avoid failing to record a transaction because of missing information. List the suspense account under “Other Assets” on your trial balance sheet.

A general ledger is where a business records its assets and liabilities on an ongoing basis, broken into separate categories or accounts. Suspense accounts are used for assets or liabilities that require further clarification before they can be assigned a permanent place in the ledger. You are not an accountant, but rather the owner of a small business. If you’re not sure where to enter a transaction, set up a suspense account and consult with your accountant. Later, when they receive more information, they can transfer the entry from the suspense account to the correct account.

Examples of Accounting for Suspense Accounts

It aids in ensuring that all transactions are recorded under the appropriate headings. It improves the quality of bookkeeping and the proper representation of all transactions as a result. It’s like a makeshift shelf where all the “miscellaneous” items can be stored until their true nature can be determined.

• 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.
• When debits and credits do not match, keep the difference in a suspense account until the problem is resolved.
• On the other hand, if a company has an expense and cannot determine which department is responsible for paying the bill, it can also go into the suspense account.
• It is also known as a clearing account, a suspense ledger, or a suspense clearing account.The purpose of a suspense account is to ensure that all transactions are properly recorded and accounted for.

Standardize, accelerate, and centrally manage accounting processes – from month-end close tasks to PBC checklists – with hierarchical task lists, role-based workflows, and real-time dashboards. They ensure that you account for all transactions accurately in your books. If https://simple-accounting.org/suspense-account-definition-meaning/ you’re unsure about where to enter a transaction, open a suspense account and talk to your accountant. If the credits in the trial balance are larger than debits, record the difference as a debit. If the debits are larger than credits, record the difference as a credit.

You received a portion of your payment

Close the suspense account and open a separate asset account once you’ve made the final payment and received the item. A suspense account cannot have a debit balance, it always shows a credit balance. If an expense is incurred, the benefit of which is received by more than one account, such an expense can temporarily be placed in a suspense account. Later, the entries can be transferred to the relevant accounts at the appropriate ratio. One important use of a suspense account is to bring the trial balance into agreement.

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. Together, we provide innovative solutions that help F&A teams achieve shorter close cycles and better controls, enabling them to drive better decision-making across the company. A suspense account is a type of account used to store transactions that cannot be correctly categorized at the time of the payment.

You buy a fixed asset but don’t receive it until it’s paid off

Companies come to BlackLine because their traditional manual accounting processes are not sustainable. We help them move to modern accounting by unifying their data and processes, automating repetitive work, and driving accountability through visibility. Timely, reliable data is critical for decision-making and reporting throughout the M&A lifecycle.

After you make corrections, close the suspense account so that it’s no longer part of the trial balance. A suspense account is an account where you record unclassified transactions. The account temporarily holds entries while you decide how you will classify them. A suspense account can also hold information about discrepancies as you gather more data. The suspense account is classified as a current asset, since it is most commonly used to store payments related to accounts receivable.

suspense account

If you could identify the department, you would not need to place the payment in a suspense account. A company’s general ledger needs to show all of your organisation’s financial accounts, including your suspense account. Payments may be https://simple-accounting.org/ received that do not clearly correspond to an invoice. In these situations, the transaction will be entered into the suspense account until more information, such as an invoice, is gathered and the transaction can be correctly assigned.

• Integrate with treasury systems to facilitate and streamline netting, settlement, and clearing to optimize working capital.
• For example, sender sends payment from US ACH account to a BB mobile number in Japan.
• This account is used temporarily for these and other similarly unclear issues.
• They may also be used for issues such as partial payments, purchasing a fixed asset that hasn’t yet been received, when information has been changed on the account, or any other miscellaneous issues.
• 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.

If you get a payment, but you don’t know who has sent it, you may need to place the amount in a suspense account. Once you have checked invoices and other correspondence and confirmed with the client or customer, you can then move the amount to the appropriate account. A partial payment occurs when a customer does not pay the full amount owed for a transaction.

After which, they need to debit the suspense account and credit the accounts payable. Once the department has been specified, the accountant or management will be able to quickly bill that department. Finally, for the buying department to complete the transaction, the accountant will credit the suspense account and debit the supply account. Rectify the following errors identified in the books of GFG as on 31 March 2022. An incomplete transaction should neither be overlooked nor entered improperly.