Bookkeeping
Where in the chart of accounts is a suspense account located?
Suspense accounts are used when your trial balance is out of balance or when you have an unidentified transaction. The suspense account is a general ledger account that acts as a holding account until the error is discovered or the unknown transaction is identified. When working with the trial balance, you can open one suspense account to hold all of the discrepancies until you find them. However, suspense accounts are temporary accounts that must be closed by the end of your accounting cycle. Businesses may decide to clear their suspense accounts quarterly, while smaller companies may do so more often.
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A customer paid an outstanding $1,000 invoice in two partial payments of $500. At times, all the required details for a particular transaction are not available but it still needs to be recorded in order to keep the accounting books depreciation waterfall updated. Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries.
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Brokerage firms also use suspense accounts to, for example, keep track of a customer’s money between the time they sell an investment and when they reinvest that money. While there is no definitive timetable for conducting a clearing-out process, many businesses attempt to regularly accomplish this on a monthly or quarterly basis. However, if the borrower continued to pay only $850 instead of the new monthly payment of $975 then a suspense account would be set up and rolling late payments would follow shortly thereafter. The suspense account is debited or credited in case of rectifying journal entries and with the rectification of all the errors of the preceding accounting period. QuickBooks Online automatically adds the GST/HST Payable and GS/HS Suspense accounts, when you set up sales tax.
Use a Suspense Account for Questionable Transactions
- The suspense account lets you record your payments without assigning the payments to a specific equipment or machinery account.
- Both of these amounts are recorded in a timely manner so that the accounting is as accurate as possible.
- Journal entry to close the suspense item and charge the expense to the correct department.
- Later, you decide to bill the supplies account of the purchasing department.
Have questions about setting up a suspense account, or any other type of account? Designed for freelancers and small business owners, Debitoor invoicing software makes it quick and easy to issue professional invoices and manage your business finances. Regardless of the issues in question, suspense accounts are cleared out once the problem is addressed, at which time the funds are promptly re-shuffled to their correctly designated accounts. At that point, the suspense account should achieve a balance of zero dollars. While there is no definitive timetable for conducting a clearing-out process, many businesses try to regularly accomplish this on a monthly or quarterly basis. In mortgage servicing, the servicer can use a suspense account to park funds temporarily if a borrower has made only a partial payment for that month.
What Is a Suspense Account, Why Is It Opened & How Is It Closed?
Before posting the payment, call your customer to verify the payment is correct. If you cannot identify the customer, hold the payment in suspense until a customer comes forward to claim the payment. My accountant used a different software to file my HST return for last year. Now that i’ve made a payment for it, when I’m recording the payment, it is moving the amount into the Suspense account.
General LedgerA general ledger is a book of accounts that records the everyday business transactions in separate ledger accounts. The entries made in a ledger can be verified by getting a NIL balance on summing up all the ledger account amounts in the trial balance. When debits and credits don’t match, hold the difference in a suspense account until you correct it.
The Trial Balance and the Suspense Account
Each transaction recorded with GST/HST/QST is added to the GST/HST Payable account. It will fluctuate depending on he sales tax filings, depending if it’s a refund or a payment. Once you’ve completed the sales tax return, a two-line journal entry is created, that moves what you owe (or what is owed to you) from the GST/HST Payable to the GST/HST Suspense account.
In investing, a suspense account is a type of brokerage account where a customer’s proceeds from selling an investment may be recorded until the customer uses the money to invest in something else. Let’s say that the borrower’s payment was increased to $975 per month for this example. The payment is increased in order to recoup the extra money the mortgage company paid for real estate taxes and in order to collect enough money for taxes the following year.
If you don’t have an accountant, we can help you locate a ProAdvisor in your local area. Let’s suppose a company receives a cash sum of $500 but it cannot figure out who the money is from or what it is for. Double Entry Bookkeeping is here to provide you with free online information to help you learn and understand bookkeeping and introductory accounting.
They can pull up your account and have the tools to unfile the return for you. Dancing Numbers helps small businesses, entrepreneurs, and CPAs https://accounting-services.net/ to do smart transferring of data to and from QuickBooks Desktop. Utilize import, export, and delete services of Dancing Numbers software.
To put it another way, you must create a suspense account whenever the trial balance is out of balance or whenever a transaction is recorded that is not immediately identifiable. Posting directly to the GST/HST Payable account via journal entry is BAD, even though it’s allowed. Although it will post to the balance sheet account, it won’t show up when you go to file a sales tax return.
