I have a problem with suspense account. I been working for some organization and they have been getting this suspense account error since 2003. But its a big organization and they didn't consider it as a problem so far..but now-a-days this suspense account is increasing rapidly and decreasing rapidly.. Could you pls tell me how to clear this suspense account. They are using Oracle Applications since 2001. Your help is greatly appreciated .
Suspense account is a temporary arrangement. This arrangement is made to make trial balance agree.
In your organisation, whether it is oracle or any other application, the error should not happen. In a computer enviornment there should be no "Suspense Account". Anyway. It seems that employees are not making entries properly.
For every debit there is equal credit. And so when an entry is done it should be reflected in both debit and credit accounts. If it is not reflecting then there is need of Suspense Account.
When an entry is not posted to one side of transaction, that is only debit is recorded and credit is not recorded then trial balance will not agree. Correspondingly if an entry is entirely forgot to be registered in any particular book then trial balance will agree but general ledger will not agree with cash book. So such entries are posted in Suspense account and matters are sorted out temperorily.
Then reconciliation is done and mistakes are found out. Suspense account is made nil in cases when all mistakes are sorted out.
Depending on the kind of transaction you may or may not need a suspense account. If a transaction is considered incomplete till a certain form of confirmation arrives the amount would be temporarily stored in suspense. The trial balance will therefore reflect an increase or decrease as and when the confirmation arrives.
