11-24-2004, 06:00 AM
Suspense account can have many reasons but simply its the difference between the credit and debit side of the trial balance resulting in the books out of balance.
Remember suspense account is created to balance the books.... it is not created to account for something missing... of course it means that somehow only one side of a transaction was posted initially.
Suspense account is shown as an asset or liability on the balance sheet although.. it reflects very poorly on the accountant. Normally suspense accounts are eliminated before financial statements are drawn up (taken to income or expense unless material) and in modern accounting systems (computer based), these kind of accounts are thing of the past.
There is another category of suspense account where e.g. we receive cash from our customers but do not have enough identification to credit it to their account; these are sometimes called unapplied cash/ unidentified cash. However, this does not affect the balance of the books as the problem lies in the subsdiary ledgers only.
Remember suspense account is created to balance the books.... it is not created to account for something missing... of course it means that somehow only one side of a transaction was posted initially.
Suspense account is shown as an asset or liability on the balance sheet although.. it reflects very poorly on the accountant. Normally suspense accounts are eliminated before financial statements are drawn up (taken to income or expense unless material) and in modern accounting systems (computer based), these kind of accounts are thing of the past.
There is another category of suspense account where e.g. we receive cash from our customers but do not have enough identification to credit it to their account; these are sometimes called unapplied cash/ unidentified cash. However, this does not affect the balance of the books as the problem lies in the subsdiary ledgers only.
