- Glossary
- Suspense Accounts
Suspense Accounts
Transactions for which it is unclear where they should be recorded are temporarily stored in a suspense account. The transaction is moved from the suspense account and into the proper account once the accounting team has looked into and determined the purpose of this kind of transaction (s). A credit or a debit can both be made when entering a suspense account.
Suspense Accounts In Business
In a company's general ledger, suspense accounts often house entries with ambiguities or discrepancies that need to be clarified. When a customer pays a bill but enters their account number erroneously, for instance, the money may be held in a suspense account until the mistake is fixed and the payment can be properly credited. Another possibility is that a customer makes a payment but does not identify which of the numerous unpaid invoices they meant to settle.
Suspense accounts are wiped out once the matter is resolved, at which point the monies are swiftly re-shuffled to their correctly assigned accounts. The suspense account should then have a balance of zero dollars. While there is no set time frame for clearing out, many businesses aim to do so on a monthly or quarterly basis.
Brokerage Suspense Accounts
Brokerage suspense accounts temporarily retain money while transactions are being processed, just like other suspense account kinds. For instance, if an investor sells a $1,000 worth of stocks but intends to use the proceeds to buy another $1,000 worth of securities right away, the $1,000 from the sale would be transferred to a suspense account until it could be used to fund the new purchase. A suspense account may also be created if additional details are required to complete the transaction or if there are other issues that need to be handled.
The "suspense balance" is the sum of money that is kept in a suspense account.
Mortgage Suspense Accounts
When a borrower accidentally misses a monthly loan payment, the mortgage servicer may use a suspense account to retain the money.
Some borrowers may purposefully make partial payments, for example by splitting their monthly payment into two equal portions. In such circumstances, mortgage servicers may hold the initial partial payment in a suspense account until they receive the subsequent partial payment.
The mortgage servicer will pay the lender its interest and principal for the month, as well as the appropriate amount to any escrow account that has been established to cover property tax or homeowners insurance payments, once sufficient funds have been received to form a full payment.
Similar to the above, if a borrower makes a payment that exceeds their monthly obligation without specifying how those funds should be used, the servicer may temporarily place the excess cash in a suspense account.
The mortgage servicer will pay the lender its interest and principal for the month, as well as the appropriate amount to any escrow account that has been established to cover property tax or homeowners insurance payments, once sufficient funds have been received to form a full payment.
Conclusion
- Suspense accounts are a type of bookkeeping instrument that can be applied in various corporate settings and for a variety of objectives.
- A business can record unclear entries that need to be clarified before being assigned to the correct accounts using a suspense account.
- When a borrower fails to make a monthly payment or makes partial payments, the mortgage servicer may employ a suspense account.
- Brokerage companies utilize suspense accounts in investing to store customer money until it may be reinvested.
- Suspenseful stories are always meant to be short-lived.
