subject: The Importance Of Creating A Suspense Account When You Are A Bookkeeper [print this page] Accounting is very exactAccounting is very exact. If you are the bookkeeper, you cannot err in the posting of acounts or items. Any error can have a great effect - the trial balance and the financial statements may not balance. But human errors are just possible - inevitable so, the bookkeeper tries to find a way to remedy the problem.
In accounting classes, it has been taught that suspense accounts can be created. These are just temporary bookkeeping accounts or items. These are nominal accounts under which an unidentifiable transaction cannot yet be classified at the time of entry. It is just an account where a certain amount can be temporarily lodged while trying to figure out what they really are. The rationale for this is just to have the account taken up in the books, without which balancing may be a problem.
Once the account has been properly classified, correct posting has to be undertaken. Thus the suspense account will be closed and the account or item will be entered into its right place in the books.
The main use of creating a suspense account is to enable the bookkeeper to have somewhere to enter an amount he or she is still very uncertain at the moment. After lodging the item to suspense account, the bookkeeper will find ways, will research in order to find the exact classification of the account previously taken up as suspense even today that accounting software is being used , there still is a suspense account for the unclassified transactions..
Aside from providing the bookkeeper a tracking of the unidentified transaction, this account is also valuable in fostering the accuracy of the financial statements which are regularly prepared. This is just a surety that no account has been overlooked. As said, accounting should show the true picture of the company. This also ensures that the trial balance is prepared very accurately.
This account also has another use. These are very important because there again arise small differences in accounts to be written off. Example of this could be small amount a bookkeeper cannot reconcile with the bank statement. There are times when the figures in the bank statements are to be rounded off and this rounding off creates minor discrepancy in the books. Thus, the amount is lodged to suspense account, which later can be written-off per advice of the accountant.
The suspense account may be negligible but as accounting is characterized by exactness, even a single centavo difference is accounted for. Without the suspense account where a bookkeeper lodges an account he or she is uncertain as of time of recording or posting, the accounting records may not be balanced.
