Moreover, if the errors are located after the preparation of the Suspense Account, all those errors can be rectified only by means of suitable journal entries. Later, when they receive more information, they can transfer the entry from the suspense account to the correct account. Another https://www.bookstime.com/ type of liability suspense account, if the company or employees have previously spent money and you are unsure where to attribute the cash, it would reside here. 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.
Suspense accounts can be an incredibly important tool, ensuring you don’t lose track of certain transactions or accidentally enter figures in the wrong place, which can result in errors in your financial statements. Whether intentional or accidental, partial payments can be tricky to match up to invoices. You can hold them in a suspense account until you know which account they should move to. For an accountant to show a suspense suspense account 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. The suspense account is classified as a current asset, since it is most commonly used to store payments related to accounts receivable.
Double Entry Bookkeeping
Use a suspense account when you’re not sure where to record general ledger entries. Most of the time, the transactions under suspense accounts are investigated and its source documents reviewed before they can be properly classified. Errors that affect one account will affect the agreement of the Trail balance.
Some examples of this would be when you receive a partial payment from a customer, or if you are unsure which invoice they are paying off. Once the payment confusion has been settled with the customer, the payment amount can be moved out of the suspense account and into the appropriate account. A suspense account is a temporary holding account to record transactions that are subsequently reallocated to other accounts.