Suspense Account

What is a Suspense Account?

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. When the transaction classification has been determined, the amount needs to be transferred from the suspense account to the correct account.

Suspense accounts are temporarily classified as a balance sheet account, usually under the heading of current assets or current liabilities depending on the normal balance. At the end of each accounting period a suspense account reconciliation needs to be carried out and any balance investigated so that correcting adjustments can be made before the final financial statements are issued.

Suspense Account Examples

Suspense account accounting is used when the correct classification cannot be determined at the time of posting. Suppose for example, an unidentified cash payment of 1,000 has been made. The suspense accounts entry journal to post the unclassified transaction would be as follows:

Suspense account journal entry
Account Debit Credit
Cash 1,000
Suspense account 1,000
Total 1,000 1,000

The debit of 1,000 is unidentified and is posted as unclassified to the suspense account in the balance sheet.

At a later stage transaction analysis shows that the amount related to the payment of interest, and a correcting interest suspense account entry is made as follows:

Suspense account correcting journal entry
Account Debit Credit
Interest expense 1,000
Suspense account 1,000
Total 1,000 1,000

The original entry to the suspense accounts has now been reversed, so the balance on the account is zero. Having been correctly identified, the interest expense account now contains the correct amount of 1,000.

For further information on the see the Wikipedia definition.

Learn a new bookkeeping term

Random bookkeeping terms for you to discover.

Link to this page

Click in the box to copy and paste the definition of suspense account link to your site.

Return to the Glossary

Suspense Account March 23rd, 2016Team

You May Also Like

Related pages

petty cash bookkeepingdebtors control accountspartnership appropriation accountdepreciation schedule templatebalance sheet ratios definitionsample abbreviated accountsretained earning balance sheetinventory accounting entries examplebad debt expense entries150 double declining balance depreciation calculatorannuity function in excelpayback period calculationincome statement multiple stepdepreciation double entryaccruals and prepayments t accountsamortisation examplemoh costformula for cost of goods manufacturedwarranty journal entriesbill receivable meaningperforma of trial balanceadvance salary paid journal entryprofitablility indexpreferred stock journal entrycalculating cvpsingle entry ledger bookdepreciation vs amortisationannualized rate calculatorcapital lease lessor accountingcash deposit entry in tallydouble entry for goodwillspreadsheet templates for small businessdeferral accountingaccounting journalizingpetty cash count formformat of voucher for paymentinventory valuation lower of cost or markettrial balance to balance sheet exampleafs reservewhat is vertical analysis in accountingdefinition accrued interesthow to compute gross profit percentagetreasury stock journal entriesaccounting quizesterm loan double entrycalculate loan amount excelgross profit margin ratio exampleprepayment accountinghow to calculate contribution margin percentagewhat is a growing annuitya problem with the monetary unit assumption is thatbookkeeping interview questions and answerscash cover ratioinstallment payment formularemittance advice chequestraight line amortization bondsrecording notes payableinventory ledger templateunearned revenue in income statementdeferred tax expense journal entryaccounting entry for deferred tax assetcalculate lifo reservedefine adjusting entriesannuity due table5 types of adjusting entriescalculating rocebalance sheet stockholders equity examplecapital bookkeepingsale of fixed asset journal entryhow to work out markupbook reconciling itemswhat is an nsf checkunit of production depreciation calculatorfv pv formulaperpetual inventory method journal entriesfuture value of ordinary annuity calculatorwhat is the purpose of the retained earnings statement