A suspense account is an account showing a balance equal to the difference in a trial balance.
A suspense account is a temporary account which can be opened for a number of reasons. The most common reasons are as follows.
- A trial balance is drawn up which does not balance, means total debits do not equal total credits.
- The bookkeeper of the business knows where to post the credit side of a transaction, but does not know where to post the debit. For an example, a cash payment might be made and must obviously be credited to cash. But the bookkeeper may not know what the payment is for, and so will not know which account to debit.
In the both cases, a temporary suspense account is opened up until the problem is sorted out.
Use of suspense account; when the trial balance does not balance
When an error has occurred which results in an imbalance between total debits and total credits in the ledger accounts, the first step is to open a suspense account.
For example, suppose an accountant drawn up a trial balance and finds that, for some reason he cannot immediately discover, total debits exceed total credit by 150$.