What is Suspense Account. Why is it opened and how is it closed?

Answer 1

A suspense account is a separate category of account code opened to record expenditure or income which, for the time being at least, cannot be properly allocated to a specific budget related expenditure or income account code. By definition, entries in suspense accounts are transitional and there is a presumption that there is no adequate authority for any items remaining in suspense over a period of time. For this reason, individual entries in suspense accounts must be capable of identification and balances in suspense must be reviewed regularly to confirm that their retention in suspense is justified.

Why is it opened and how is it closed

All items added to the suspense account are found on report- Daily Suspense Update Report. The 'Daily Suspense Update Report' gives the details of each transaction such as debit/credit account, transaction code, date posted, description and reason why the transaction put in suspense. The most common circumstances for transactions to be posted to the suspense account include the use of an invalid six-digit account number, four-digit subcode or an account previously frozen.

The daily balance of the suspense account is monitored through the file, Daily Suspense Balance (by month).xls. This file is kept to monitor and investigate any unusual balances in the suspense account over a given time. Any relevant information regarding the balances is kept in the notes section of the file.

Once the correct account information has been received by the Administrator, a batch is created in order to correct the transaction in (remove from the suspense account and post to the correct account). A batch ID is assigned by the Office of Finance for the used to enter all of correcting transactions. No corrections are made by the originator of the transactions. The procedures described above are also performed during month-end closing and year-end closing processes. These procedures are integrated in the month-end closing and year-end closing checklists to ensure the suspense account is monitored and cleared on a timely fashion throughout the accounting cycle closing process.