Otherwise, larger unreported transactions may not be recorded by the end of a reporting period, resulting in inaccurate financial results. Therefore, it is vital to have a process in place to clear out the suspense account on regular basis so that all of the suspense account entries are moved into their designated accounts to zero out the suspense balance. Alternatively, the transaction can be left in the daybook while you consult your accountant or bookkeeper and the correct account can be determined at a later date. Large corporations can clear their suspense accounts periodically, whereas small enterprises can do so more often.
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Definition of Suspense Account
Automatic bank reconciliation will help you suit your payments in a moment when it comes to the transactions. It is important to hold unidentified amounts in a separate account to organise and identify them later more quickly. Such unexplained sums will not be left in transactions which have already been established.
This keeps uncategorized transactions separate from categorized transactions. In mortgage servicing, the servicer can use a suspense account to park funds temporarily if a borrower has made only a partial payment for that month. In investing, a suspense account is a type of brokerage account where a customer’s proceeds from selling an investment may be recorded until the customer uses the money to invest in something else.
Suspense accounts in real estate
In accounting for small business, most suspense accounts are cleared out on a regular basis. Move suspense account entries into their designated accounts to make the suspense balance zero. A suspense account is a general ledger account in which amounts are temporarily recorded. The suspense account is used because the appropriate general ledger account could not be determined at the time that the transaction was recorded. The suspense account in accounting is a general ledger account used to make temporary unclassified transaction postings until the correct classification can be determined using transaction analysis. A business generates many transactions throughout the course of its operations.
- For example, if a customer of a business makes a payment but writes down their account number incorrectly, that money may be parked in a suspense account until the error is corrected and the payment can be properly credited.
- If it’s an asset in question, the suspense account is a current asset because it holds payments related to accounts receivable.
- This ensures that the company’s financial statements remain unblemished by inaccuracies while the necessary investigation is conducted to ascertain the nature of the transaction.
- A suspense account is an account temporarily used in general ledger to carry doubtful amounts which can either be a payment or a receipt.
Close the account after moving the entry to the correct permanent account. A trial balance is the closing balance of an account that you calculate at the end of the accounting period. When debits and credits don’t match, hold the difference in a suspense account until you correct it.