What Is A Suspense Account, Why Is It Opened & How Is It Closed? Xero accounting

suspense account definition

Let’s suppose you have been alerted that a remittance someone sent you from abroad is ready for withdrawal. Until you actually make the withdrawal from the agent or financial institution, the remittance money may be stored in their suspense account. A partial payment occurs when a customer does not pay the full amount owed for a transaction. Partial payments can come in many different forms, such as a deposit on a real estate transaction or an upfront payment for a service order.

suspense account definition

When a client level activity is processed in order to create a suspense refund, configuration is present to require that OIPA automatically generate a suspense refund number. A customer paid $1,000 in cash without specifying which invoice the payment relates to. Our global network includes leading consulting and technology organizations that enable us to deliver exceptional solutions https://www.bookstime.com/ to our shared clients. Explore our schedule of upcoming webinars to find inspiration, including industry experts, strategic alliance partners, and boundary-pushing customers. World-class support so you can focus on what matters most.BlackLine provides global product support across geographies, languages, and time zones, 24 hours a day, 7 days a week, 365 days a year.

Definition of Suspense Accounts

They provide a means for temporarily storing these transactions until their nature is identified or discrepancies are cleared. Suspense accounts are particularly useful in cases where the timing, classification, or allocation of journal entries is uncertain, or when errors or discrepancies have been detected. A suspense account suspense account is one that temporarily records transactions that have yet to be assigned to their proper accounts. The suspense account is situated on the general ledger and is used to temporarily store specific transaction amounts. Having said that, any sums recorded in this account will ultimately be transferred to another permanent account.

As trial balance is the basic input for preparation of final accounts, it is not possible to retain open trial balance till those errors were detected. It acts as a temporary location for storing unidentified transactions and once the amount is properly identified, it can be moved to the appropriate ledger account. A business generates many transactions throughout the course of its operations. Sometimes it may happen that the transactions may have some missing information or incorrect details were entered into records. But a business has to record every transaction, in such cases the use of a suspense account is recommended.

Suspense Account Best Practices

Patriot’s online accounting software is easy to use and made for the non-accountant. No, unlike mortgage escrow accounts, the money in a mortgage suspense account doesn’t earn any interest for the borrower. Similarly, if a borrower pays more than they owe for a particular month—without designating how those funds should be applied—the servicer may put the extra money into a suspense account for the time being. In this process, after detection of every error, the balance of Suspense Account reduces gradually and when all errors are rectified, there will be nil balance in the Suspense Account. In other words, we can say that Suspense Account stands automatically closed when all one sided errors are rectified. Let us now look at a few case studies and learn the opening and disposal of Suspense Account.

suspense account definition

Create, review, and approve journals, then electronically certify, post them to and store them with all supporting documentation. Automatically create, populate, and post journals to your ERP based on your rules. If you don’t know who made the payment, look at your outstanding customer invoices and find which one matches the payment amount. Contact the customer to verify that it’s their payment and the right invoice. The amount of Suspense Account helps to locate the errors because with the amount of Suspense Account, the accountant can find the errors committed in the past. When trial balance does not agree, in that case the amount of difference can be put on the shorter side of the trial balance as ‘Suspense Account’ and thus, the trial balance stands closed.