Lets lift the lid - What is a suspense account?
A suspense ledger account is, in effect, a miscellaneous ledger which is not specifically allocated to a client. It is merely a temporary solution to enable a cashier to post unallocated funds to the client side of a ledger.
Unallocated funds means funds which have been paid into the organisations bank account.
It is widely accepted that temporary should be interpreted in days, opposed to weeks or months. So temporary is the key word here! It is unlikely to be used for an unknown debit payment, as
sufficient funds and authority would have to have been in place prior for any payment to be made out of client account.
It is good practice to have a policy around the use of a your firms suspense ledger and this should also form part of your monthly COFA financial compliance pack.
Still have questions? Here are some of the common questions I have been asked:
Can I use a suspense account to transfer aged client balances to allow files to be archived?
Can I use a suspense account to transfer surplus balances which are being donated to charity?
Quite simply - No, the balance you hold should be retained on the matter to which it relates. This allows a simple audit trail and shows a true representation of the status of your matters.