SUSPENSE the name implies, this account is used for the purpose of collecting together in a convenient form items which for various reasons are unable to be allocated to the proper account to which they relate. Some of the circumstances under which a Suspense Account may come into being may be said to be 1. Errors waiting to be discovered.
2. Cash received, but sender not known.
3. Extraordinary expenditure which it is intended to write off over a period of years.
4. Cash paid under protest, or with a possibility of recovery.
5. Difference in trial balance.
6. Goods supplied subject to future settlement or discussion as to price.
7. Where consignments are charged at selling price, and the profit thereof is held up to await confirmation by means of Accounts Sales. The term is also used in connection with outstanding liabilities on nominal accounts at the close of a balancing period. For instance, if a trader's rent is, say, per annum, payable quarterly, it may so happen that, at the date of his balance sheet, a quarter's rent is due but not paid. In this case the 'amount of the rent would be debited to rent account in the nominal ledger and carried to the credit of a suspense account, and this suspense account would appear on the " " side of the balance sheet. Similar adjustments would be made in connection with rates, taxes, licences, and items of a periodical character. Conversely, apportionments in the nature
of insurance, subscriptions, &c., would be credited to their respective nominal accounts and carried to the debit of a suspense account, which would appear on the " assets " side of the balance sheet. Incidentally, both sets of adjust ments may be carried to the one account, and the balance shown on the "liabilities " or the " assets " side of the balance sheet, according to whether the balance of the suspense account be a credit balance or a debit balance.
It should be pointed out that the term " suspense account," since it may cover so many items of a varied character, is necessarily sonic" hat ambiguous, and its use is therefore to be deprecated. In these clays anything that makes for clearness in the nomenclature of accounts is to be commended at all costs, and since the nature of items in a suspense account is always ascertain able, it would be infinitely preferable if they were recorded on the face of the accounts in such a manner as to indicate their precise nature, rather than pass them 12:aler a cloak or huddle them together in the sheep-pen of a " suspense " account.