A suspense account is a temporary holding account for an amount whose correct home in the books is not yet known, or for a difference that stops the books balancing. It is cleared by correcting journals that take each amount out of suspense and post it to the right account, until the suspense balance is nil. A suspense account is a working tool, never a place for figures to stay at the year end.

Why does a suspense account get opened in the first place?

ACCA’s technical article on suspense accounts and error correction describes a suspense account as a temporary holding account for a bookkeeping entry that will end up somewhere else once the correct account is determined. In practice a suspense balance appears in one of three ways.

  • A manual or imported journal does not balance. ACCA notes that a computerised system may automatically balance an unbalanced manual journal by posting the difference to suspense. In a fully manual system the same thing happens at the trial balance stage, when the difference between total debits and total credits is parked in suspense so that work can continue.
  • The bookkeeper does not know where an item belongs. ACCA gives the example of a receipt on the bank statement that the bookkeeper does not recognise: the bank side is posted correctly and the other side goes to suspense while it is investigated.
  • The bookkeeper is unsure of the amount or the treatment. A receipt that does not match the payment, or an adjustment whose double entry is not yet understood, can be posted with the uncertain part sitting in suspense.

Many bookkeeping packages add a fourth route of their own: bank feed lines that have not been matched or categorised often sit in a holding or uncategorised account. That account works in exactly the same way and needs the same discipline.

Which errors end up in suspense and which do not?

Only errors that make the debits and credits disagree, or items deliberately parked, pass through suspense. ACCA lists errors of complete omission, principle, commission, reversal of entries and original entry using the same wrong figure on both sides as errors that do not create a suspense balance. These still need correcting, but the correcting journal goes directly between the ledger accounts affected. The types are explained in detail in types of bookkeeping error.

Errors that do create a suspense entry include a transposed figure posted differently on each side, two debits or two credits posted for one transaction, and one side of the double entry posted with the other side unknown.

How do you work out the correcting journal?

ACCA’s suggested method is to compare what has been done with what should have been done, and post the difference. Set it out in three steps for every item.

  1. What was posted? Write out the original entry exactly, including the suspense line.
  2. What should have been posted? Write out the correct double entry, with no suspense line.
  3. What is the difference? The correcting journal is the set of entries that turns the first into the second. One side will always be the suspense account if suspense was used originally.

The same article warns about errors that need double the original amount to correct. If a sales credit note was processed as a sales invoice, sales and receivables have been increased when they should have been reduced, so the correction is twice the amount: one half reverses the wrong invoice and the other records the credit note.

Every correcting journal should carry a narrative explaining the error, a reference to the evidence (the bank statement line, the invoice, the email that identified the payer) and the initials of whoever approved it. How to set out and authorise journals is covered in journal entries explained.

What does clearing a suspense account look like in practice?

Illustration only. At the year end a small business has a credit balance of £1,155 on suspense, made up of three items.

  1. A receipt of £600 on the bank statement was not recognised. It was posted as debit bank £600, credit suspense £600. It turns out to be a customer settling an invoice.
  2. An insurance prepayment of £300 was posted as debit insurance £300, debit prepayments £300, credit suspense £600. The correct entry was debit prepayments £300, credit insurance £300.
  3. A repair costing £250 was paid from the bank, but the receipt seemed to say £205. The bookkeeper posted debit repairs £205, debit suspense £45, credit bank £250. The supplier confirms the charge was £250.
Item Correcting journal Effect on suspense
1 Debit suspense £600, credit trade receivables £600 Debit £600
2 Debit suspense £600, credit insurance £600 Debit £600
3 Debit repairs £45, credit suspense £45 Credit £45
Total Net debit £1,155, clearing the opening credit of £1,155

Item 2 needs £600, not £300, because insurance carried a wrong debit of £300 and was also missing the credit of £300. After the three journals the suspense account is nil.

Do suspense corrections change the profit?

Often they do, which is why suspense must be cleared before draft accounts are finalised rather than afterwards. In the illustration, item 1 moves an amount between two balance sheet accounts and leaves profit unchanged. Item 2 reduces the insurance expense by £600, raising profit by £600. Item 3 adds £45 to repairs, reducing profit by £45. The net effect is profit £555 higher than the draft showed.

A simple schedule listing draft profit, each correction and revised profit is the cleanest way to show the effect. For a company that figure feeds the corporation tax computation, and for a sole trader or partnership it feeds the self assessment return, so a suspense balance written off to profit without investigation can leave tax understated or overstated.

What about VAT when an item sits in suspense?

An unidentified receipt in suspense may well be a sale that included output tax, and an unidentified payment may include input tax. VAT Notice 700/21 says the VAT account is the link, or audit trail, between the business records and the VAT return. Items sitting in suspense at the end of a VAT period are outside that trail, so the return may be wrong. Where possible, identify items before the return is prepared.

If an item is identified only after the return has been filed, VAT Notice 700/45 sets out how to correct it. Net errors that do not exceed £10,000, or that fall between £10,000 and £50,000 but do not exceed 1% of the box 6 figure on the return for the period when the error was found, can be corrected on the next return (method 1). Larger errors, and any deliberate errors, must be notified separately (method 2). See correcting VAT errors.

What should never happen to a suspense balance?

  • Leaving it in the accounts. Section 386 of the Companies Act 2006 requires records sufficient to show and explain the company’s transactions. A balance that nobody can explain fails that test by definition.
  • Writing it off to sundry expenses or sundry income. This makes the trial balance tidy but hides the error and guesses at its effect on profit and tax.
  • Dumping it on the director’s loan account. Unknown receipts and payments are sometimes posted to the director’s account at the year end. That changes what the director owes or is owed, with real tax consequences, explained in director’s loan account explained.
  • Netting items off. A £600 debit and a £600 credit may cancel to nil but still be two separate errors in two different accounts. Clear each item with its own journal.
  • Letting it build up. Clearing suspense monthly, alongside the bank reconciliation, means each item is still fresh enough to trace.

How should a suspense account be reviewed?

Keep a schedule that lists every item in suspense with its date, amount, where it came from and what is being done to identify it. Review the schedule each month, and do not sign off the year end until it is empty. Where an item really cannot be identified after reasonable enquiry, record the work done, agree a treatment with the owner or directors on the best evidence available, and keep the file note with the year end papers. HMRC can ask to see how a figure was arrived at during a compliance check, and a dated note showing the enquiries made is far stronger than an unexplained write off.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.