Accounting is all about numbers. However, when you’re doing accounting, it’s normal to make a mistake or two!
If you’re a business owner, you might be curious how accountants solve mistakes like these when they happen. Well, when the accountant can’t find the mistake, they’ll use what’s called a suspense account.
You will inevitably see a suspense account appear on the trial balance for your business, so it’s worth understanding how it works.
What is a Suspense Account?
So, a suspense account is designed to tackle any major errors located in your ledger. When you add up a trial balance, the accountants may spot some inconsistencies in the accounts, which stop the columns from balancing properly.
If this happens, they insert what is called a suspense account, which will record and store any discrepancies. Once the problem has been properly identified, they can take the entry out of the suspense account and put it into the appropriate place, which will resolve the error.
This is what we would call “zeroing” the suspense account.
When Do We Need Suspense Accounts?
A suspense account is something which is used a lot, like a spare room or kitchen drawer. We often shove things into it that we don’t have a home for at that exact moment, and they’re stored safely until such a time as there’s proper space for them.
The thing you have to remember is that errors like this need to be properly resolved for the books to be balanced. There are quite a few different errors in accounting that stop books from being balanced, and the suspense account is a normal part of resolving the process. It allows you to continue going through the books without finding the problem but also marking where the problem is for later reference.
At the end of the day, the suspense account is designed to mitigate the problem of human error. We are all human, we all make mistakes, and sometimes, those mistakes can be costly. With that in mind, it’s very important that you try to use suspense accounts as part of the typical bookkeeping process.
The great thing about a suspense account is that it’s not a permanent solution to the problem, so it’s not a copout, but it is used as a way to temporarily resolve the issue. By taking any discrepancies and inaccuracies to one side and leaving them alone for a minute, the accountant is free to take a look at the rest of the books properly and see if they can identify where the problem is. It may be that the solution to a discrepancy is just further in.
The best thing that you can do is have a professional bookkeeper handle this for you, which is exactly what Probookkeeper is here for. We can handle any of your needs surrounding bookkeeping, so you don’t have to worry about trying to use suspense accounts yourself.