It might sound like the title of the latest thriller
We've had The Accountant, The Shawshank Redemption, The Untouchables and even Monty Python believing it was 'fun to charter an accountant, and sail the wide accountancy' in their cinematic tribute to the profession in the Meaning of Life, but I doubt that The Suspense Account will be the next biggest thriller to top the best sellers list or a play running for over 65 years in London's West End (well, you never know these days).
The suspense account is, however, one of those tools that bookkeepers and accountants can't live with out, if used properly.
So what is the suspense account and how do I use it?
In short, the suspense account is a control account that helps you 'park' unknown transactions until you've got time to sort them out. This could be something as simple as receiving some income that you have no idea who it's come from, so something more sinister like finding fraudulent activity on a bank account and not knowing what to write off until it's been repaid. This allows you to reconcile the bank account, for example, even though some of the items haven't yet found their true account or been dealt with accordingly. Once you have your answer, you take the appropriate action to remove those transactions from suspense into where they should actually be, whether that be a client balance that's been received or an expense to the company, etc.
A word of caution
The suspense account is, however, one of those tools that bookkeepers and accountants can't live with out, if used properly.
So what is the suspense account and how do I use it?
In short, the suspense account is a control account that helps you 'park' unknown transactions until you've got time to sort them out. This could be something as simple as receiving some income that you have no idea who it's come from, so something more sinister like finding fraudulent activity on a bank account and not knowing what to write off until it's been repaid. This allows you to reconcile the bank account, for example, even though some of the items haven't yet found their true account or been dealt with accordingly. Once you have your answer, you take the appropriate action to remove those transactions from suspense into where they should actually be, whether that be a client balance that's been received or an expense to the company, etc.
A word of caution
The suspense account is a great little tool, providing:
- you only include those items you truly don't know what to do with until you receive an answer, and
- you make every effort to move everything back out of it before your accounts year end. If you don't, your accountant or bookkeeper will want to know why.
You should never carry a balance over into your next years accounts in a suspense account, any issues should be resolved and the balance be £0.00 at year end.
In conclusion
The suspense account is a wonderful tool, so long as it's used correctly. As long as you make sure you have everything cleared out before your year end and that it is used for only unknown transactions that you need to confirm.