Bookkeeping - Suspense Accounts

The main advantage of this is that it allows bookkeepers somewhere to allocate items that they are uncertain about

. They can then research and identify those items and allocate them to the correct place. Any business that uses accounting software to keep their books and records should use a suspense account if they are at all uncertain about particular transactions at their time of entry.

Certain receipts or invoices for instance, may have been allotted an invalid number, or an invoice number could be missing from a sales invoice. Once the number is corrected, or the invoice number is obtained, then these items can be moved from the suspense account and posted to the correct place. In the case of payments, for example, the same logic applies, if there is a difference of opinion as to which department a payment should be charged to, or a payment cannot be identified on the bank statement, then these should be temporarily held in the suspense account.

It not only helps in the tracking of all 'uncertain transactions' that a bookkeeper has to enter, but also in maintaining the accuracy of any management or financial accounting statements that are prepared. It helps to ensure that no transactions are overlooked in the posting process and that the trial balance is correct for a particular trading period.

Sometimes a suspense account is used if there are tiny differences that need to be written off; for example, it is not unusual for a bank or cash account to have tiny reconciliation differences. These could be due to rounding up errors or the bookkeeper may have made a small mistake when entering the data. Therefore, these types of differences may be posted to the suspense account and consequently written off to another area under the advice of the accountant. Indeed, spending a great deal of time and effort looking for the reasons for these tiny differences may not be practical.

Bookkeeping - Suspense Accounts

By: Adrian Hargraye

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