suspense account examples

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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. Like other suspense accounts, a brokerage suspense account is sometimes used as a temporary holding account when an investor sells securities but plans to reinvest the money right away.

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With the passage of time, it becomes difficult to clear out errors. Therefore it is necessary to investigate and make corrections on regular basis. Although recording the suspense is not considered a good sign for internal controls of the business.

suspense account examples

Close the suspense account and open a separate asset account once you’ve made the final payment and received the item. Suspense account is a temporary and imaginary account, which is closed later when the errors are located. The artificial tallying suspense account examples of the trial balance by the introduction of suspense account enables the Final Accounts to be prepared even before the location of errors. A suspense account will be managed by the finance team and serve as a catch-all for unknown amounts.

Example #2: You’re not sure how to classify a transaction

Finally, a fourth variant allows the sponsor to transfer all the excess assets into a suspense account that can then be allocated to workers’ defined contribution accounts over seven years. Contrarily if the credit side of your trial balance is larger than the debit side, the difference is recorded as a debit to the account. When there is uncertainty regarding the maker of the payment, the transaction is posted in the suspense account. A suspense account is used to record doubtful receipts and payments. The difference amount is temporarily recorded in a suspense a/c and should be cleared at some point as it possesses a control risk.

What type of account is a suspense account?

What type of account is a suspense account? 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.