A suspense balance mortgage refers to a temporary account where incomplete or unclear mortgage payments are held. If payments don’t cover all dues or lack allocation details, they are placed in suspense until resolved. This ensures payments are applied correctly, preventing potential servicing errors.
Do you already work with a financial advisor?
In short, a suspense account is the point of last resort when you need a short-term holding bay for financial items that will end up somewhere else once their final resting place is decided. CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.
What is your current financial priority?
For example, the periodic account statements that servicers are responsible for providing to borrowers must indicate any payments that have been put into a suspense account and the total amount of money in that account. The servicer must also explain what the borrower needs to do in order to have that money applied to their mortgage payment. When the trial balance shows credits exceeding debits, the difference should be recorded as a debit to reflect the temporary nature of those funds. In these situations, the transaction will be entered into the suspense account until more information, such as an invoice, is gathered and the transaction can be correctly assigned. As cash has been received, an accounting entry will be recorded in the suspense account until the missing information is provided or obtained.
You received a partial payment
Imagine you deposit money into your brokerage account to buy stocks, but there’s a delay in processing your investment choice, or there’s ambiguity about your instructions. Instead of this causing confusion or potential errors in your account, the funds are placed into a brokerage suspense account. This ensures that your money is safely held while any uncertainties are resolved. A suspense account in accounting is like a temporary storage room where you keep transactions that do not have a clear place to go in the financial records. When a transaction occurs and it’s not immediately clear where it should be recorded, it goes into this mystery box until more information is available to properly classify it.
What happens in case a suspense account is not closed?
You might receive a partial payment from a customer and be unsure about which invoice they’re paying. Hold the partial payment in a suspense account until you contact the customer. When you find out the invoice, close the suspense account and move the amount to the correct account. Both suspense accounts and clearing accounts are used to temporarily record transactions, until they can be permanently assigned.
For example, sender sends payment from US ACH account to a BB mobile number in Japan. The customer receives an alert on their mobile to withdraw this money from a BB agent. Until they withdraw, the remittance stays in a suspense account, earning the financial institute or the BB enabler float/interest on that money. When customer withdrawal is completed, the money moves from the suspense account to the account of the agent who facilitated the cash withdrawal. It can be a repository for monetary transactions (cash receipts, cash disbursements and journal entries) entered with invalid account numbers. If one of these conditions applies, the transaction should be directed to a suspense account.
Example 1: Trial balance adjustment
- He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.
- Adjusting Entries are used to correct mistakes, whereas suspense accounts are useful for temporarily holding transactions until there is enough information to post them.
- 11 Financial may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements.
- There are several errors that may be revealed by the trial balance which involve the suspense account.
- It is used exclusively for mortgage payments that cannot be fully applied to a loan account immediately.
- A suspension account is an account used for any expenditure or balance that can not be established temporarily.
Consequently at the end of each accounting period the business carries out a suspense account reconciliation. Any balance is investigated so that correcting adjustments can be made before the final financial statements are issued. Accordingly irrespective of the issue resulting in the suspense account posting, at the end of the accounting period the account balance reduces to zero with correcting journal entries. The errors which do not involve a suspense account will, when discovered, be corrected by means of a journal entry between the ledger accounts affected.
How confident are you in your long term financial plan?
A suspense account is an account used to temporarily store transactions for which there is uncertainty about where they should be recorded. Once the accounting staff investigates and clarifies the purpose of this type of transaction, it shifts the transaction out of the suspense account and into the correct account(s). Eventually, you allocate entries in the suspense account to a permanent account.
Comments