2. (a) What is suspense Account? Why is it opened and how is it closed? Explain. (10)
Answers
A suspense account is an account in the general ledger in which amounts are temporarily recorded. The suspense account is used because the proper account could not be determined at the time that the transaction was recorded.
When the proper account is determined, the amount will be moved from the suspense account to the proper account.
Example #1: Receiving a partial payment
You receive a partial payment of $50 from a customer.
Open a suspense account. Credit $50 to the suspense account. Debit the cash account for the same amount.
AccountDebitCreditSuspense Account50Cash50
When you receive the full payment from the customer, debit $50 to the suspense account. Also, credit accounts receivable for the same amount. This closes the suspense account and moves the payment to the correct account.
AccountDebitCreditSuspense Account50Accounts Receivable50