You might receive a partial payment from a customer and be unsure about which invoice they’re paying. Hold the partial payment in a suspense account until you contact the customer. When you find out the invoice, close the suspense account and move the amount to the correct account. 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 could also be a liability if it holds accounts payables that you don’t know how to classify. It is classified as a current asset since it is used for storing payments.
If the credit balance is higher, the difference to be shown on debit side i.e asset side on the balance sheet. If debit side is higher, the difference to be shown on credit side i.e liability side on the balance sheet. Sometimes you may got full payment from your customers but you unsure who paid to your account.
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It is useful to have a suspense account, rather than not recording transactions at all until there is sufficient information available to create an entry to the correct account(s). Otherwise, larger unreported transactions may not be recorded by the end of a reporting period, resulting in suspense account inaccurate financial results. Both suspense accounts and clearing accounts are used to temporarily record transactions, until they can be permanently assigned. Suspense accounts, however, are more typically used when there is some question about the transaction that needs to be resolved.
The suspense account is classified as a current asset, since it is most commonly used to store payments related to accounts receivable. It is possible to also have a liability suspense account, to contain accounts payable whose disposition is still being decided. If so, the liability suspense account is classified as a current liability. Similar to the other types of suspense accounts, brokerage suspense accounts temporarily hold funds while transactions are completed. A suspense account may also be established if further information is needed to finalize the transaction or if there are other complications that need to be resolved. Regardless of the issues in question, suspense accounts are cleared out once the problem is addressed, at which time the funds are promptly re-shuffled to their correctly designated accounts.
Suspense account and accounting software
In case of a “Credit balance”, it is shown on the liability side of a balance sheet. Identifying an amount shouldn’t be an impossible task (if so, it may suggest fraud). Remember to consider https://www.bookstime.com/articles/what-is-a-voided-check 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.
Most accounting systems contain a suspense or mispostings account in their chart of accounts, but this is something that you should avoid using unless there are no other options. If you don’t have an account for a specific expense then you may need to create a new one within your chart of accounts. Keep track of all of your transactions, even from your smartphone with online accounting & invoicing software like Debitoor. The accountant will record this unclassified transaction in the general ledger suspense account to complete his assignments by the allotted time. However, after getting more information about the nature of the transaction, he will move it from the suspense account to its respective account. A customer paid an outstanding $1,000 invoice in two partial payments of $500.
Example #2: You’re not sure how to classify a transaction
The bookkeeper is unable to balance the company’s trial balance, with the credit column exceeding the debit side by $500. For example, if an investor who sells off securities worth $10,000 plans to promptly reinvest that money into other financial instruments, the $10,000 would be temporarily moved to a suspense account until it is reinvested. The unclassified transactions temporarily “parked” in this account are a “suspense” that we need to investigate and relocate into their correct accounts accordingly. A suspense account is a temporary account to store doubtful transactions and discrepancies. Someone on our team will connect you with a financial professional in our network holding the correct designation and expertise.
When any fixed assets purchase on a payment plan but don’t receive it until the full payment is made. The assets will be recognized at the time of paid the full installments. If you have taken over the accountancy for a company and they have a suspense account it is important to ensure that these amounts are explained, identified, and finally removed and placed in the correct account.
