Two kinds of temporary account sit in most charts of accounts, and they are often confused. A suspense account is a parking place for amounts you do not yet understand. A clearing account is a waypoint for amounts you understand perfectly but that arrive in pieces. Both should be empty at the end of every period that matters. When they are not, they tell you something different.
Suspense: for unknowns only
Post to suspense when you know money moved or a posting is needed, but not yet where it belongs:
- a receipt with no reference that you cannot match to a customer;
- a payment you do not recognise on the bank statement;
- the balancing figure when an imported trial balance does not balance;
- a supplier invoice with no indication of what it was for, awaiting an answer.
Suspense is a question, not an answer. Every item in it should have a date, an amount and a note of who is finding out what it is. How to investigate unknown receipts and payments, and how long to allow, is covered in unidentified payments and clearing entries.
What suspense must not be used for:
- Differences you cannot be bothered to find. A bank reconciliation “difference” posted to suspense hides an error rather than fixing it.
- Items you know the answer to but have not set up an account for. Create the account instead.
- Long-term storage. An item more than a month or two old in suspense needs a decision, even if that decision is to write it off with approval.
Clearing accounts: flows that should net to zero
A clearing account holds amounts that are expected to come in and go out again, usually because two systems or two dates are involved:
| Clearing account | What goes in | What takes it out | Should be zero when |
|---|---|---|---|
| Net wages | Net pay from the payroll journal | The wages payment from the bank | After each payday |
| Card takings | Daily card sales from the till | The processor’s payout, plus fees | After each settlement, allowing for days in transit |
| Bank transfers | Money leaving one of your accounts | The same money arriving in another | When both sides are posted |
| Marketplace receipts | Sales and fees from the marketplace report | The payout to your bank | After each payout cycle |
| Payroll deductions to third parties | Pension, attachment of earnings, union fees deducted | Payments to those bodies | After each payment date |
A clearing account with a balance is not automatically wrong: card takings on the last day of the month may not settle until the 2nd. But the balance should be explainable item by item, and it should be the same few items you expected. The card case is set out in card payment clearing in the chart of accounts, and the payroll accounts in payroll liabilities in the chart of accounts.
Example: a transfer clearing account
On 31 March you move £10,000 from the current account to the savings account. The current account shows it on 31 March; the savings account credits it on 1 April.
| Date | Entry | Debit | Credit |
|---|---|---|---|
| 31 March | Current account statement | Transfers clearing £10,000 | Current account £10,000 |
| 1 April | Savings account statement | Savings account £10,000 | Transfers clearing £10,000 |
At 31 March the clearing account shows £10,000, which is money in transit and correct. On 1 April it returns to zero. If it does not, one side of the transfer was posted twice, or to the wrong account.
Review both every month
Add both types to the month-end reconciliations:
- List every item in suspense and every clearing account, with dates.
- Clearing accounts: tick each balance off against what you expect to be in transit. Investigate anything older than the normal settlement cycle.
- Suspense: chase each item’s owner. Move resolved items to the correct accounts with a narration.
- Track the totals over time. A suspense balance that grows every month is a process problem, not a bookkeeping one.
The balance sheet reconciliations for small businesses puts these checks alongside the bank, debtors, creditors and VAT.
Before the year end
Suspense should be empty at the year end. A balance there has to be explained in the accounts somehow, and an accountant will not sign off a balance sheet with unknown items in it. Anything still unresolved needs a decision: reclassify on the best evidence, refund, or, for small items, write off with the owner’s approval and a note of why. Clearing accounts should hold only genuine items in transit, each one identified.
If suspense regularly fills up, look at the causes rather than the symptoms: missing payment references, receipts that arrive without remittances, or a bank feed rule that posts to suspense by default. Fixing those is the subject of matching bank feed entries.