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.
Related Links
You May Also Like
-
Introduction to Bank Reconciliation Process
These set of articles provide a brief introduction to Bank Reconciliation Process. This topic not only discusses the meaning of bank reconciliation process but also discusses how this process in handled in new age ERPs and Automated Reconciliation Systems.
-
Treasury Management - Functions
Treasury management has become an specialized function. Treasury function helps in managing the Risk-return profile as well as the tax-efficiency of investment instruments. In larger firms, it may also include trading in bonds, currencies and financial derivatives. Learn about the various tasks, activities and imperatives, undertaken by treasuries in in today's context.
-
Although there is no straight forward answer to the question, how to best organize a treasury function, this article provides an generic view of the way large MNCs creates departments or sub-functions within the treasury function.
-
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.
-
Cash Clearing – Accounting Entries
The Cash Clearing process enables you to track amounts that have actually cleared your bank. Learn the steps and accounting entries that gets generated during the cash clearing process.
-
The Cash Clearing process enables you to track amounts that have actually cleared your bank. Till reconciliation happens the amounts are parked in 'Cash Clearing Account'.
-
Effectively using cash management with trade finance products brings tangible benefits to both corporates and financial institutions.Learn the various benefits of cash management process.
-
Disbursement Float is the time taken from payment creation to settlement. Collection float is the sum total of time taken by Payment Float; Mail Float; Processing Float and Availability Float. Learn more!
-
What is Account Reconciliation?
Before you understand the Bank Reconciliation Process it is important to understand what is account reconciliation and why it is carried out.
-
Collection Float is the time spent to collect receivables. Collection float is the sum total of time taken by Invoice Float; Mail Float; Processing Float and Availability Float. Explore more!
