In plain English
Use it briefly, then reclassify. A balance that sits for months hides costs.
Aim for zero at each month end.
Why it matters
A suspense account lets you keep the books moving when you cannot identify a transaction right away. The danger is that it becomes a permanent dumping ground. Anything left there is missing from the right expense or income line, which distorts profit and can mean lost deductions or unrecorded sales.
A large suspense balance at year end is a red flag for any accountant reviewing the books.
Worked example
A $75 unknown charge sits in suspense until you find the receipt.
How to handle it
- Use one clearly named suspense or uncategorized account rather than several.
- Add a memo to every suspense entry saying what you know about it.
- Review the account weekly or monthly and look up receipts, emails or bank details to identify each item.
- Reclassify each item to its correct account once you know what it is.
- Aim to clear the balance to zero before closing each month.
Common mistakes
- Parking an item there to force a reconciliation to balance, which hides the real difference.
- Letting the balance build up all year, so a backlog of unknown items has to be researched at once.
- Leaving deposits in suspense, which can mean revenue is never reported.
Not the same as: Clearing account
A suspense account holds items you cannot identify yet. A clearing account holds items you can identify but that need to be matched or routed, such as a processor payout that will be split into sales and fees. See Clearing account.
Go deeper
- Uncategorized and Suspense Accounts: Clear Them Out: Why uncategorized income, uncategorized expense and suspense balances hurt your reports, and a simple process for clearing them every month.
Related terms
- Trial balance: A list of all account balances at a date, used to check that debits equal credits.
- Undeposited funds: A QuickBooks holding account for payments received but not yet deposited.
- Shrinkage: Inventory lost to theft, damage, error or spoilage, found by comparing counts to the books.
Common questions
What is a suspense account?
A temporary account for transactions you cannot yet classify.
Can you give an example of suspense account?
A $75 unknown charge sits in suspense until you find the receipt.
Can I file taxes with a balance in suspense?
Your accountant will need to know what the items are before preparing the return. It is much easier to clear them yourself first, since you have the receipts and memory of the transactions.
Is uncategorized expense in QuickBooks the same as a suspense account?
It works the same way. Both are temporary homes for transactions waiting to be classified, and both should be emptied regularly.
General information, not tax, legal or accounting advice. Confirm rules with the IRS, the NJ Division of Taxation or a licensed professional.