How to use a Suspense Account


The Suspense account is best explained with an example:

Example 1: While completing your bank reconciliation, you will record an adjusting entry (AJE) for bank service charges of $340 and interest income of $231. But the bank statement also included an unexplained deposit of $500, which is either a mistake or needs to be checked out. Creating a Suspense account lets you keep working until you can get more information. The journal entry is as follows:

Cash in Bank 391  
Bank Fees Expense 340  
    Interest Income   231
    Suspense   500

When you learn that the deposit was employee Alice’s reimbursement of what she paid for her husband’s hotel room on a business trip, you credit Travel Expense and close out the Suspense account, as follows:

Suspense 500  
    Travel Expense   500

Example 2: You are paying a credit card bill of $7,267 but don’t know which expense account to charge for a $172 item. The person who could explain the charge is unavailable for a few days, but you need to make the journal entry now. What can you do? Create a Suspense account and charge the $172 item to it:

Expense Account No.1 1,865  
Expense Account No. 2 5,230  
Suspense Account    172  
   Cash in Bank   7,267

When you learn that the charge goes to Expense Account No. 3, you debit this account and close out the Suspense account, as follows:

Expense Account No. 3 172  
  Suspense Account   172

Classifying a Suspense account

Theoretically, a Suspense account may be classified as an asset, liability, revenue or expense, but usually, it is a liability or expense. It does not matter which because it is closed out with a zero balance before financial statements are prepared. Here are the pros and cons of these two classifications:

Classifying the account as a liability.  Advantage: Assures that the account will not disappear at year end (when the expense accounts are closed out). Disadvantage: Increases the risk of the correct entry never being made because the account gets lost among the other liability accounts.

Classifying the account as an expense.  The advantage is that as the last account in the chart of accounts, it is unlikely to be overlooked.  The disadvantage: If it is overlooked, it will disappear at year-end before the correction is made.

Why a Suspense account is better

An amount posted to a suspense account is rarely overlooked. The same amount posted to, say, Miscellaneous Expense or Miscellaneous Income, may well be missed because the balance in these accounts includes other amounts and will not stand out in the trial balance. Thus, the questionable amounts may never be moved to the correct accounts.

Freelance bookkeepers

When doing write up work or other tasks, Suspense accounts let you work without interruption but still protect your client by earmarking items that require further investigation.

Problem: Client A, a small retailer, sells inexpensive items with odd prices ($1.27, $1.92, $2.17). She assures you that her checkbook tells you everything you need to know: All deposits, without exception, are sales. Yet you know from experience that she always has nonsales amounts in the deposits that she has forgotten. At year end, the first thing you do is reconcile her 12 bank statements to compile revenues and expenses. In her January bank statement, you see deposits of $453.23, $938.30 . . . and $1,000. Surely, no deposit of cash and checks could amount to precisely $1,000 in sales. What should you do?

Solution: Credit suspect deposit amounts to a Suspense (rather than Revenue) account so that you can complete the bank reconciliation without interruption. When this actually occurred, the $1,000 deposit turned out to be a loan that the client had made to the store she owned. If it had been posted to a Revenue account, she would have paid tax on a loan.

For employed or freelance bookkeepers

A Suspense account is effective only when used as a temporary account. Get the missing information as soon as possible, and then close out the account.

Social Security Launches GeoMaps

gepmapsSocial Security provides financial benefits, tools, and information to help support you throughout life’s journey. We’re excited to announce the launch of geospatial mapping at Social Security! Our new initiative,GeoMaps, complements our Open Government and Open Data Initiatives. For several years, we have published a significant amount of data, but we know people learn and receive information in different ways.

Our geospatial maps will provide the public and other interested parties with a deeper understanding of our programs through geographic representations, increasing the transparency of our agency data. At our map gallery, users can view geospatial maps on the Old Age, Survivors, and Disability Insurance benefits by State, and the Help America Vote Verification Transaction by State map. These maps let you view large amounts of our data in a quick, geographic visualization. You can also download the data, and mesh it with your own data to create other maps.

These are our first maps on Geoplatform, a federal platform where we can collaborate and share our geospatial datasets. Social Security is now one of many organizations (e.g. federal, state, local, universities) participating in GeoPlatform, a site managed by the Federal Geographic Data Community and chaired by the Department of the Interior.

We encourage you to explore Social Security’s new mapping features by visiting our Open Government Map Gallery, and on If there are other types of maps you would like published, you can submit your idea to us. As more geospatial maps become available, we’ll add them to the Open Government Map Gallery!

IRS Warns of a New Wave of Attacks Focused on Tax Professionals

Source: IRS Warns of a New Wave of Attacks Focused on Tax Professionals

* Alert: Are you prepared for new W-2 and most 1099 filing deadlines?

The deadlines changed in the Protecting Americans from Tax Hikes (PATH) Act of 2015 and are effective for the tax year 2016 (filed in 2017) in the next filing season. But many employers either are not aware of these deadlines or are unprepared to meet them, according to experts interviewed by Tax Notes Today. Small businesses, especially those that do not use outside services or have limited resources, are considered likely to be unaware of the deadline change or unable to devote the resources required to change their processing.

In 2017, both paper and electronic tax year 2016 Forms W-2, and W-3 and those 1099s that include nonemployee compensation in Box 7, must be filed by Jan. 31, 2017. Forms 1099 that do not include an entry in Box 7 will still be due by Feb. 28 (but if filed electronically, by Mar. 31). Where you file them remains unchanged: 1099s at the IRS; W-2s and the W-3 at the SSA. All W-2s and 1099s must be mailed to payees by Jan. 31, 2017.

The accelerated deadlines are an attempt to reduce identity theft and false refund claims; by receiving the information earlier, the IRS may be able to match them against income tax returns as they are filed and identify those that are fraudulent. Many states have changed their filing deadlines for the same reasons.

If you are responsible for 1099 filings, decide whether you want to file all 1099s by Jan. 31 or only those that have non-employee compensation in Box 7. Regardless of when you decide to file the two categories of 1099s (Box 7 compensation v. no Box 7 compensation) payroll and tax experts interviewed by Tax Notes Today say that most businesses should start working on the 2017 filings 1 to 2 months earlier than in previous years.

How To Cheat Sheet for Positive and Negative Numbers

Here is your cheat sheet to help you remember what to do with positive and negative numbers (integers) with adding, subtracting, multiplying and dividing. You should have an overview of integer basics.

 Here’s How:

Adding Rules:

Positive (Increase) + Positive (Increase) = Positive (Increase): 5 + 4 = 9
Negative (Decrease) + Negative (Decrease)= Negative (Decrease): (- 7) + (- 2) = – 9

Sum of a negative and a positive number: Use the sign of the larger number and subtract

(- 7) + 4 = -3
6 + (-9) = – 3
(- 3) + 7 = 4
5 + ( -3) = 2

Subtracting Rules:

Negative – Positive = Negative: (- 5) – 3 = -5 + (-3) = -8
Positive – Negative = Positive + Positive = Positive: 5 – (-3) = 5 + 3 = 8
Negative – Negative = Negative + Positive = Use the sign of the larger number and subtract (Change double negatives to a positive)
(-5) – (-3) = ( -5) + 3 = -2
(-3) – ( -5) = (-3) + 5 = 2

Multiplying Rules:

Positive x Positive = Positive: 3 x 2 = 6
Negative x Negative = Positive: (-2) x (-8) = 16
Negative x Positive = Negative: (-3) x 4 = -12
Positive x Negative = Negative: 3 x (-4) = -12

Dividing Rules:

Positive ÷ Positive = Positive: 12 ÷ 3 = 4
Negative ÷ Negative = Positive: (-12) ÷ (-3) = 4
Negative ÷ Positive = Negative: (-12) ÷ 3 = -4
Positive ÷ Negative = Negative: 12 ÷ (-3) = -4

How to Start a Business

Starting a business is an exciting proposition, but it’s also an incredibly challenging undertaking. The resources in this section will help you learn about what it takes to start a business.

  • Is Entrepreneurship For You?

    What characteristics do you need to be an entrepreneur? What does it take to start and succeed in business?

  • 20 Questions Before Starting

    Starting a business can be the most important decision you make in your life. Ask yourself these 20 questions to begin your preparation and planning.

  • 10 Steps to Starting a Business

    These 10 steps can help you plan, prepare and launch your business.

  • Understand Your Market

    To run a successful business, you need to learn about your customers, your competitors and the economic conditions in your industry.

  • Business Data & Statistics

    Get access to data and statistics on your competitors, industry and target customer groups.

  • Business Types

    One of the first decisions you will make is the type of business you will open. Before making your decision, explore the opportunities that are available like a home-based or online business.

  • Find a Mentor or Counselor

    When starting a business, advice from SBA partner organizations such as SCORE Mentors, Small Business Development Centers, and Women’s Business Centers can help you avoid common pitfalls.

How should I study accounting?

Here are eight suggestions on how to study accounting:

  1. Stay current. Don’t skip class, don’t skip an assignment. Not only are accounting concepts related, they build on earlier concepts. Postponing and cramming is the wrong way to study accounting. Do not delay gaining a true understanding of accounting concepts, homework assignments, exam questions, etc.
  2. Understanding beats memorizing. Accounting concepts are related. For example, if you have a true understanding of the accounting equation, debits and credits, and the matching principle, you will see the logic of adjusting entries. That understanding will eliminate the need to memorize a lot of details concerning adjusting entries.
  3. Strive to understand WHY. As you are learning accounting, make sure that you know the WHY of each concept and principle. When doing your assignments, ask yourself “WHY is my work correct or incorrect?” If you don’t understand WHY, read the free explanation that pertains to the topic. Having a second presentation may give you the insight you need.
    View our free accounting explanations
  4. Test your understanding. After briefly reviewing your lecture notes, try our free quiz questions with answers. We provide questions for each accounting topic so you can quickly identify what you know and what you don’t know. (Studies have shown that answering quiz questions will improve the retention of information.)
    View our free accounting quizzes
  5. Communicate with your instructor. If you do not understand the WHY of a concept or a solution, ask your instructor for assistance. There are several benefits associated with this: companies that recruit students are looking for communication skills, you will likely need a faculty reference sometime in the future, company recruiters might ask your instructor about you, etc.
  6. Realize that you are learning for your future. If you need more motivation, keep in mind that you are learning accounting for more than your next accounting exam. You are learning accounting to be successful in your first job, your career, your own business, etc.
  7. Review and prepare with our practice exams. To deepen your understanding and to improve your ability to recall accounting concepts, we provide 1,700+ practice exam questions (with answers). These are a great tool for preparing for your final exam or job interview. All of the questions were created by a CPA with more than 25 years of teaching experience. Our practice exams are only available when you join AccountingCoach PRO.
  8. If you struggle with the basics, we have visual tutorials. If you need more assistance, we offer eightVisual Tutorials for the following accounting and bookkeeping topics: debits and credits, accounting equation, adjusting entries, introduction to financial statements, balance sheet, income statement, cash flow statement, and bank reconciliation. Each tutorial presents the important concepts in a methodical, step-by-step manner and concludes with an interactive quiz to give you immediate feedback. Our visual tutorials are only available when you join AccountingCoach PRO.