Clearing V/s Suspense Account
Suspense and clearing accounts resemble each other in many respects but there exists important fundamental difference between the two. Read more to explore these differences.
Suspense and clearing accounts resemble each other in many respects but there exists one important fundamental difference.
Both are temporary accounts. Transactions are entered and finally transferred to the appropriate account.
Suspense and clearing accounts have entirely different functions.
Clearing accounts are used to hold transactions for later posting and ensure information is recorded correctly and completely.
A suspense account is used when there appears to be a problem. It serves to record an amount until the problem is resolved.
Both suspense and clearing accounts are "zeroed out" periodically. This means everything in an account is moved to other accounts, leaving a zero balance.
Suspense A/c is used for tracking Uncertainties – to hold transactions when there is some ambiguity involved.
For example, customer has deposited payment in the bank account and you are unable to identify the customer from available information,
You can put the transaction in a suspense account until you determine where it belongs.
Whereas Clearing Accounts are used for tracking transactions on a temporary basis until it's time to post them to a more permanent account.
Taking the same example, now the customer has sent payment against many outstanding invoices and you know it belongs to a particular customer but not to which invoice.
This may be parked in a clearing account until the confirmation is received from customer and amount applied to correct invoice.
Just to keep track of correct outstanding past due invoices.
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Suspense and clearing accounts resemble each other in many respects but there exists important fundamental difference between the two. Read more to explore these differences.
