Suspense Account: Meaning and explanation

Type of Suspense Account:

The need for Suspense account: - 

1. In the case of Preparation of Trial Balance and total of the Trial was not agreed then we will need to open the suspense account and transferred the difference into it.
2. With the help of this account, an accountant can Be Locating the Errors done in the past.
3. This account will provide information about the nature of the Error account because it provides the balance of the suspense account(Debit or Credit).
4. It helps in the Rectification of the one-sided error.
5. It also helps in the Preparation of Final accounts because final accounts are based on the trial balance so if the trial balance has disagreed then how accountant will prepare the final accounts.

When to use suspense account:

1. Don't know about sender or payer: -

At the time of receiving payment in the bank without the information of the sender or payer then we will post this transaction into the suspense account till we did not get to know the name of the sender or payer or customer or trade receivable.

2. There is a difference in the trial balance: -

The total of both sides of the trial balance is always agreed or matched with each other. So, In the case when these have disagreed, we will prepare new accounts named suspense account and the amount of difference will be posted into it and it will be shown on the shorter side of the trial balance.

Trial Balance of Ms. Ram and sons as on 31/03/18

3. You don't know how to classify the specific transaction: -

In some time, An data entry operator did not understand the actual business transaction, in that case, he will open a suspense account and record this transaction into it. The benefit in the recording in the suspense account is that when an accountant finalizes the books of account first all he will clear the all pending transaction in the suspense account. So if he posted it in the wrong account then there will chance of error which will be located after the audit process or if he did not record it then there is a chance of missing the voucher for the transaction.