May 26, 2022

What is a Suspense Account? F&A Glossary

suspense account in balance sheet

At times, all the required details for a particular transaction are not available but it still needs to be recorded in order to keep the accounting books updated. Likewise, if the trial balance shows debits are larger than credits, the difference should be entered as a credit because the amount will be cleared once the difference has been reconciled. Transactions that are booked before an allocation is made to the appropriate cost or profit center will be recorded in the suspense account until they can be properly assigned. Whether you’re new to F&A or an experienced professional, sometimes you need a refresher on common finance and accounting terms and their definitions. BlackLine’s glossary provides descriptions for industry words and phrases, answers to frequently asked questions, and links to additional resources. It’s time to embrace modern accounting technology to save time, reduce risk, and create capacity to focus your time on what matters most.

  • There are several errors that may be revealed by the trial balance which involve the suspense account.
  • BlackLine is a high-growth, SaaS business that is transforming and modernizing the way finance and accounting departments operate.
  • Businesses may decide to clear their suspense accounts quarterly, while smaller companies may do so more often.
  • Transform your accounts receivable processes with intelligent AR automation that delivers value across your business.
  • Given that the difference in Trial balance Rs.2610 was debited to Suspense a/c; give journal entries with Suspense a/c.
  • Stay up to date on the latest corporate and high-level product developments at BlackLine.

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. Since our founding in 2001, BlackLine suspense account has become a leading provider of cloud software that automates and controls critical accounting processes. While the responsibility to maintain compliance stretches across the organization, F&A has a critical role in ensuring compliance with financial rules and regulations.

What type of account is a suspense account?

There is no set time limit for clearing out a suspense account. Most companies clear their suspense accounts on a monthly or quarterly basis. Investing and brokerage suspense accounts temporarily hold investors’ funds until the money is allocated towards the purchase of new investments.

Can a suspense account be debit or credit?

If the debits in the trial balance exceed the value of credits then the difference will be recorded in the suspense account as a credit, and if the credit exceeds the value of debit in the trial balance then the difference will be recorded in the suspense account as a debit.

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. The amount of money held in suspense account is referred to as the “suspense balance.” Similarly, if a borrower pays more than they owe for a particular month—without designating how those funds should be applied—the servicer may put the extra money into a suspense account for the time being. A mortgage servicer can use a suspense account to hold funds when a borrower falls short on their required monthly loan repayment, possibly by accident.

Suspense Account

She has over 2 years of experience in writing about accounting, finance, and business. A suspense account is always made on the weaker side of the trial balance. On locating the errors in the beginning or in the course of next year, rectifying entries would be passed and when all the errors have been completely rectified the suspense Account will show no balance.

What is an example of a suspense account?

The company sends $50 in payment to the client, but the client's accountant realizes the amount may be inaccurate and should be closer to $500. The accountant debits the $50 from a cash account and credits the $50 to a suspense account until the accountant can get more information.

While other trial balance errors do exist (e.g., error of omission, commission, principle, original entry, reversal of entries), they do not affect the suspense account. Error corrected with a journal entry for the difference amount between the affected ledger account and the suspense account. When the trial balance shows credits exceeding debits, the difference should be recorded as a debit to reflect the temporary nature of those funds. Finally, internal bookkeeping errors, such as overstated or understated balances, duplicate entries, or incomplete or partial entries are recorded in the suspense account until the error can be adjusted.