Suspense Account in the Chart of Accounts
Examples of Suspense Accounts
Assume that a company receives cash of $500 but cannot readily determine the reason why it received the $500. Obviously, the company's asset Cash is to be debited, but the account to be credited (required by the double-entry system) for $500 is not known. The unknown account could be in any of the following sections of the chart of accounts:
- Asset section if the cash was from the sale of another asset or the collection of an asset
- Liability section if the cash was a deposit for future work to be done
- Revenue section if the cash was for work that was recently earned, but not yet billed
- Expense account if the cash was a refund of an earlier expense
Unfortunately, the best section may not be known at the time of the receipt, and it is hard to say where you will find the suspense account in your own chart of accounts and general ledger.