Uses of Suspense Account

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on April 27, 2023

There are diverse uses for suspense accounts. One important use of a suspense account is to bring the trial balance into agreement.

Two other notable uses are discussed in this article.

Use 1

If a bookkeeper is unsure about which account to debit or credit in a transaction, they can temporarily place the entry in a suspense account.

Later, when they receive more information, they can transfer the entry from the suspense account to the correct account.

Example

A calculator is purchased for $750 in cash. The bookkeeper is unsure whether to debit the office machines account or the electronic appliances account. He later decided to place it in the office machines account.

First Entry

Dr. Suspense account: $750

Cr. Cash account: $750

Subsequent Entry

Dr. Office machines account: $750

Cr. Suspense account: $750

Use 2

If an expense is incurred, the benefit of which is received by more than one account, such an expense can temporarily be placed in a suspense account. Later, the entries can be transferred to the relevant accounts at the appropriate ratio.

Example

A transport bill of $8,500 is paid in cash. Later, the decision is made to charge 4/5 of it to carriage inward and the rest to carriage outwards.

First Entry

Dr. Suspense account: $8,500

Cr. Cash account: $8,500

Subsequent Entry

Dr. Carriage inward account: $6,800

Dr. Carriage outward account: $1,700

Cr. Suspense account: $8,500

Uses of Suspense Account FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.