In a business there are occur many transactions due to which many times it is not known to whom a particular transaction is related and due to this it is not possible to record that transaction and if that transaction is left out so that it can be recorded later when it is known about it, then there is a possibility of it being left out, hence a suspense account is prepared to solve this problem.
A suspense account can be prepared at any time as there are no restrictions on it. With its help, the debit and credit side in accounting can be managed for some time as it is a temporary account whose purpose is to maintain balance in accounting for some time. For example, when it is not known what to debit or credit, balance needs to be balanced for some time, etc., a suspense account can be used in such a situation.
Table of Contents
What is a Suspense Account?
A suspense account is a temporary account used to record doubtful transactions and it is an account that comes under all types of accounts like personal account, real account, and nominal account. The balance of the suspense account can be both debit and credit as all types of transactions can be recorded in it, and it remains as long as the entry made in it is transferred to the correct place.
If the suspense account is not closed before preparing the balance sheet, then it is shown on the asset side of the balance sheet if its balance is debit and on the liability side if its balance is credit. It is also used to balance the trial balance for some time.
Note: It is necessary to clear the suspense account balance
Features of Suspense Account
Following are the features of suspense account:
1. Temporary Account:
A suspended account is a temporary account as it is used only for a short period, such as until the transactions are recorded in the correct place, accounting errors are detected, etc. When the transactions are recorded in the correct place and the errors are detected, it is closed.
2. Doubtful Transactions:
All doubtful transactions are recorded in it as its purpose is to solve this type of problem. For example, where the payment has come from, who has been paid, who is to be debited, and who is to be credited, etc. When the transaction is properly verified, it is transferred to the correct place.
3. All Account:
Suspense account comes under all types of accounts like personal account, real account, and nominal account. For example, when the transaction related to expenses is recorded in it then it becomes a nominal account and when the transaction related to assets is recorded then it becomes a real account and when the transaction related to a person is recorded then it becomes a personal account.
4. Both Balance:
Its balance can be debit or credit because all types of transactions are recorded in it, if a debit balance is recorded then its balance will be debit and if a credit balance is recorded then its balance will be credit or whatever comes after adding and subtracting debit and credit balance will be its balance.
5. Show on the Balance Sheet:
If its balance is not fully cleared by the time the balance sheet is prepared then it is shown on the balance sheet. If it has a debit balance then it is shown on the asset side and if it has a credit balance then it is shown on the liability side. Once its balance is fully cleared then it is removed from the balance sheet.
6. Temporary Relief:
Suspense account provides temporary relief from the related problems that occur during the accounting process. For example, if the trial balance is not matching then it can be matched by showing the mismatched amount, doubtful transactions can be recorded in it till they are verified, etc. Note: It is necessary to correct this problem later.
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QNA/FAQ
Q1. What is a Suspense Account?
Ans: A suspense account is a temporary account used to record doubtful transactions.
Q2. Is suspense account shown on balance sheet?
Ans: Yes, if balance is pending then it is shown on the balance sheet
Q3. Can the balance of the suspense account be both debit or credit?
Ans: Yes, the suspense account balance can be either debit or credit.
Q4. Suspense Account records doubtful transactions. Is this true?
Ans: Yes this is true.
Q5. Does suspense account provide temporary relief?
Ans: Yes, suspense account provides temporary relief.
Q6. Write the features of the suspense account.
Ans: Following are the features of suspense account:
1. It is a temporary account.
2. It records doubtful transactions.
3. It provides temporary relief.
4. It comes under all accounts.
5. Its balance may be debit or credit.
6. It is shown on the balance sheet.
7. It remains till its balance is cleared.
8. It is of a perpetual nature.
9. It is necessary to clear its balance.
10. It helps in balancing the trial balance.
