Suspense Account Case Study

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explaining your answers. 1.1 Suspense Account A suspense account is an account in the general ledger in which amounts are temporarily recorded. The suspense account is used because the proper account could not be determined at the time that the transaction was recorded. When the proper account is determined, the amount will be moved from the suspense account to the proper account. Besides that, an entry to a suspense account may be a debit or credit. ( Averkamp, 2003 ) 1.2 Reasons suspense account is needed It is useful to have a suspense account, rather than not recording transactions at all until there is sufficient information available to create an entry to the correct account(s). Otherwise, larger unreported transactions…show more content…
(b) Secondly, there is a difference in a trial balance and a suspense account is opened with the amount of the difference so that the trial balance agrees (pending the discovery and correction of the errors causing the difference). This is the only time an entry is made in the records without a corresponding entry elsewhere. For example, a customer sends in a payment for RM2,000 but does not specify which open invoices it intends to pay. Until the accounting staff can ascertain which invoices to charge, it temporarily parks the RM2,000 in the suspense account. In this case, the initial entry to place the funds in the suspense account is: Debit Credit Cash RM2,000 Suspense Account…show more content…
The accounting staff is uncertain which department will be charged with the invoice, so the accounting staff records the following initial invoice, while the department managers argue over who is responsible for payment: Debit Credit Suspense Account RM2,500 Accounts Payable RM2,500 The initial entry records the invoice in the accounts payable system in a timely manner, so that the company can pay it in 30 days. The department managers eventually decide that the office supplies account of the sales department should be charged with the expense, so the accounting staff records the following entry: Debit Credit Supplies - Sales dept. RM2,500 Suspense account
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