Suspense Account is a general ledger account that temporarily records transactions before their true existence can be established. Often we don’t have all the information needed for a particular transaction, but to keep our ledger books up-to-date, we need to log every transaction, and that’s where it is useful because we’re not sure where to record general ledger entries. Errors affecting an account will directly affect trial balance if we cannot find and correct the error instantly. Errors in trial balance kept in a separate temporary and imaginary account. To find the error, we have to create a suspense account for a short period of time. By introducing it, the checking of the trial balance allows the final accounts to be more precise and correct.
It is classified as a current asset since payments related to account receivables are usually stored in the account. You can also have a suspense account for liabilities, containing accounts payable which are not yet determine. If that is the case, the suspense liability account is classified as an existing liability.
Why is suspense account important?
Suspense accounts help you to organize your accounting books. They guarantee that you correctly account for all transactions in your records. You may have inaccurate balances when reporting unknown transactions in permanent accounts. Suspense accounts help prevent transactions from being recorded in the wrong accounts. If a transaction is complete but the source or purpose of the transaction is not clear. It helps in identifying the error and place it on the correct account. In order to remain organized it is essential to maintain unknown quantities in a distinct account. These unequal sums should not be left in your operations that have already been identified. It provides a temporary location until positioned correctly.