Where is suspense account shown in the financial statements?

What is Suspense account?

A suspense account is a general ledger account prepared in the following situations;
1. Transactions are unidentified or unclassified at the time of occurrence, or
2. Differences arises between the total debit side & the credit side of the trial balance.

When the right account is determined or the error is rectified, the amount shall be moved from the suspense account to its proper account.

 

Presentation of Suspense account in Financial Statements

In case Suspense A/c is not closed at the end of the accounting period, the balance in the Suspense A/c is presented in the Balance Sheet.

Particulars Financial Statement Presentation
Debit balance in Suspense A/c (ie. Total of Debit side > Total of Credit side) Balance Sheet Presented under the head “Current Assets”
Credit balance in Suspense A/c (ie. Total of Credit side > Total of Debit side) Balance Sheet Presented under the head “Current Liabilities”

 

Extracts of the balance sheet have been attached for better understanding.

Suspense a/c as asset

Suspense a/c as liability

 

Example of Suspense A/c

A customer of ABC Ltd makes an online payment of 50,000 but he did not specify against which open invoice (out of the 20 open invoices) the amount needs to be settled. In this case, the accountant will pass the initial entry in the suspense account till he identifies the correct open invoice.

 

Journal entry to park the unidentified amount in the suspense account

Bank A/c Debit 50,000
 To Suspense A/c Credit  50,000

The accountant identifies the open invoice against which the amount of 50,000 is to be settled.

 

Journal entry to close the suspense account and post the amount received against the appropriate invoice and proper account-

Suspense A/c Debit 50,000
 To Accounts Receivable (Invoice No. xx) A/c Credit  50,000