Question

what is suspense account ? what is it opened and how is it closed ? explain

Answer 1

A suspense account is an account in the general ledgerin 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

Answer 2

Suspense accounts are used when the trial balance is out of balance or incase of an unidentified transaction. The suspense account is maintained as a general ledger account, until the error is discovered or the unknown transaction is identified.

All discrepancies are maintained as suspense account in trial balance. However, these are temporary accounts that must be closed by the end of the accounting cycle.