This account is created to make the Trial Balance equal on both sides, in other words, to balance. If the error is not found before the financial statements are prepared, the Suspense Account will be included on the Balance Sheet as either a current asset or a current liability.

What is a suspense account in accounting?

Key Takeaways. A suspense account is a catch-all section of a general ledger used by companies to record ambiguous entries that require clarification. Suspense accounts are routinely cleared out once the nature of the suspended amounts are resolved, and are subsequently shuffled to their correctly designated accounts.

What type of account is a suspense account in Quickbooks?

A suspense account is a holding account found in the general ledger. Depending on the transaction in question, a suspense account can be an asset or liability. If it’s an asset in question, the suspense account is a current asset because it holds payments related to accounts receivable.

Where does suspense account go in balance sheet?

In case a suspense a/c is not closed at the end of an accounting period, the balance in suspense account is shown on the asset side of a balance sheet if it is a “Debit balance”. In case of a “Credit balance”, it is shown on the liability side of a balance sheet.

What is the function of a suspense account?

A suspense account is an account in the general ledger that is used to temporarily store transactions that require further analysis before a permanent assignment in the records can be made. The use of a suspense account allows time to research the nature of a transaction while still recording it on the company’s books.

Why is there a need to prepare a suspense account?

A suspense account is an account in the general ledger in which amounts are temporarily recorded. A suspense account is used when the proper account cannot be determined at the time the transaction is recorded. Suspense accounts should be cleared at some point, because they are for temporary use.

How is the suspense account used in accounting?

The suspense account in accounting is a general ledger account used to make temporary unclassified transaction postings until the correct account classification can be determined using transaction analysis. The suspense account allows the double entry to be maintained at the time of posting when the correct account is unknown.

How do you open a suspense journal entry?

For suspense account journal entries, open a suspense account in your general ledger. Enter the full amount in question. The format of suspense account entries will be either a credit or debit. Also, enter the same amount with an opposite entry in another account.

When to move money to a suspense account?

For example, if an investor is selling certain securities in the amount of $500 and then buying different securities in the same amount, the $500 from the sale would move to a suspense account until it can be allocated to the new purchase.

Can a suspense account be used for partial payments?

In some cases, a borrower deliberately makes partial payments, by intentionally dividing his monthly payment into two chunks. In such cases, mortgage servicers can use suspense accounts to house the first partial payment until the second payment is remitted.