What is a suspense account?
A companys general ledger needs to show all of your organisations financial accounts, including your suspense account. Learn more about the meaning of suspense accounts, right here. Suspense account meaning  As the name suggests, a suspense account is an account that temporarily records amounts that are yet to have their proper accounts determined. In balance sheet terms, a suspense account is not ideal, as it can prevent you from accurately balancing the books. However, in your day-to-day business activities, using a suspense account in accounting is much like placing a document on a to file pile. A typical suspense account example is running a trial balance to check a double-entry balance sheet. If there is an anomaly, this amount is placed in a suspense account until the balance is corrected, and the amount is accurately placed in the right account. Just like any to-do pile, the suspense account cannot hold your mystery amounts forever, and its proper place will need to be determined. Businesses may decide to clear their suspense accounts quarterly, while smaller companies may do so more often. Suspense account example  There are several common reasons to use a suspense account, including:  Unknown payees  If you get a payment, but you dont know who has sent it, you may need to place the amount in a suspense account. Once you have checked invoices and other correspondence and confirmed with the client or customer, you can then move the amount to the appropriate account. Assets not yet received  If you are purchasing an asset that you will not receive until you have paid in full, payment instalments can be placed in a suspense account and moved to an asset account when completed. Partial payments  Whether intentional or accidental, partial payments can be tricky to match up to invoices. You can hold them in a suspense account until you know which account they should move to. Placing the suspense account on the balance sheet  Showing a suspense account on balance sheet documents is more straightforward than it may seem. In fact, its no different from any other account. For example, if you arent sure which account to place a transaction into, it would look like this:  Account Debit Credit Suspense account 20 - Accounts payable - 20  After investigating, you find that this payment is intended for your marketing division. You would then move the amount to the correct account, ensuring you balance it on the sheet, like so:  Account Debit Credit Suspense account - 20 Marketing 20 -  The aim of a suspense account in balance sheet terms is always to be a balance of zero, as this means that everything has been correctly recorded, and there are no anomalies unaccounted for. A suspense account will be managed by the finance team and serve as a catch-all for unknown amounts. The purpose of a suspense account is to hold amounts that cannot be categorised, so it would not be possible for each department to have a suspense account. If you could identify the department, you would not need to place the payment in a suspense account. Identifying an amount shouldnt be an impossible task (if so, it may suggest fraud). It might just require a bit of detective work. Remember to consider 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. We can help  GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.