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Why do we create suspense account?
A suspense account is an account in the general ledger in which amounts are temporarily recorded. A suspense account is used when the proper account cannot be determined at the time the transaction is recorded. Suspense accounts should be cleared at some point, because they are for temporary use.
What meant by suspense account?
A suspense account is a temporary resting place for an entry that will end up somewhere else once its final destination is determined. A bookkeeper is unsure where to post an item and enters it to a suspense account pending instructions.
Where does suspense account go in financial statements?
In case a suspense a/c is not closed at the end of an accounting period, the balance in suspense account is shown on the asset side of a balance sheet if it is a “Debit balance”. In case of a “Credit balance”, it is shown on the liability side of a balance sheet.
What type of account is suspense account?
current asset
The suspense account is classified as a current asset, since it is most commonly used to store payments related to accounts receivable. It is possible to also have a liability suspense account, to contain accounts payable whose disposition is still being decided.
What type of account is a suspense account?
A suspense account is a holding account found in the general ledger. Depending on the transaction in question, a suspense account can be an asset or liability. If it’s an asset in question, the suspense account is a current asset because it holds payments related to accounts receivable.
Is suspense account an asset or expense?
The suspense account is classified as a current asset, since it is most commonly used to store payments related to accounts receivable. It is possible to also have a liability suspense account, to contain accounts payable whose disposition is still being decided.
What is a trial balance and what is the purpose of preparing it enlist the items shown in the debit column and credit column also explain in brief suspense account?
Preparing a trial balance for a company serves to detect any mathematical errors that have occurred in the double-entry accounting system. If the total debits equal the total credits, the trial balance is considered to be balanced, and there should be no mathematical errors in the ledgers.
Is suspense account an asset or liability?
The suspense account is classified as a current asset, since it is most commonly used to store payments related to accounts receivable. If so, the liability suspense account is classified as a current liability.
What is suspense balance?
The suspense balance refers to the amounts held in a suspense account. The term “suspense” originates from the fact that your lender holds these funds in suspense — think “suspended in the air” — until it applies them.
Does a trial balance error affect the suspense account?
Effectively a posting error – the suspense account is again involved. A trial balance error must affect the suspense account – but no ledger entry. This one needs thought. Take it one sentence at a time. Is the suspense account involved?
What is the use of suspense account?
Suspense account makes the trial balance to agree and facilitates in the further preparation of financial statements. Suspense account can be placed on either side of the balance sheet which depends on the placement in the trial balance.
What is a trial balance in accounting?
A trial balance is the closing balance of an account that we calculate at the end of the accounting period. When the two sides of the trial balance don’t match, we hold the difference in a suspense account until we correct it.
What is an errorsuspense account?
Suspense Account is a temporary ledger account, opened for putting the difference on shorter side of the trial balance. Sometimes, it is not possible to locate someone sided errors in-spite of taking all efforts for their detection.