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Factoids |
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Miscellaneous Suspense is a holding account where temporary transactions are
held until further information is available |
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If you have made a mistake and need to close the books, put the difference in
Miscellaneous Suspense until you have time to make the correction. |
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You should clear the Miscellaneous Suspense account by the end of each year |
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Contact John Day |
One of the great things about
the discipline of accounting is that there is always a tidy
solution to an accounting problem. Well, most of the time. The
reason for this is because you are done only when the books are
"in balance". You can never just throw up your hands, walk away,
and leave everything hanging. Each transaction must be dealt
with individually and "put to bed". But what happens when you
don’t have all the information you need to complete a
transaction? You may need to finish the bookkeeping by a
deadline and you can’t let one piece of missing information stop
you in your tracks.
This is where your "handy-dandy" General Ledger (GL) account
called Miscellaneous Suspense is called into action. No, I
didn’t type that wrong. It is not Miscellaneous Expense. The
word is "suspense" as in "suspended animation". Miscellaneous
Suspense is a holding account where temporary transactions are
held until further information is available that will tell you
where to record the transactions permanently.
To begin, we need to establish where Miscellaneous Suspense
should be located on Rent to Own company's Chart of Accounts.
The Chart of Accounts is a list of all the GL accounts organized
by the five sections: Assets; Liabilities; Equity; Revenue; and,
Expense. There is no set rule where Miscellaneous Suspense has
to be located. However, it definitely does not belong in the
Revenue or Expense sections. I think the easiest place to locate
it is in the Asset section, under Other Assets.
Here are some examples of how to use the account:
Let’s assume that you are cruising along entering checks you
have written into the Cash Disbursements Journal in your
computer accounting software program. All of a sudden you come
to a check for $220.00 that has no GL account number on it and
it is written to a name you don’t recognize. You are the RTO
manager or owner and you can’t remember what that check was
written for. Simply code the check to the Miscellaneous Suspense
account until you have time to figure it out. Since all checks
written result in a decrease to Cash, which is recorded on the
credit (right) side of the ledger, the entry of $220.00 will be
recorded on the debit (left) side of the ledger.
|
Miscellaneous Suspense |
Cash-in-Bank |
|
220.00 |
|
| 220.00 |
A few days later, you discover that the check was written to
that kid you hired one busy weekend to help load big rental
items on the truck. Using the General Journal, you write a
journal entry to reclassify the Miscellaneous Suspense entry to
Outside Services:
| DESCRIPTION |
DEBIT |
CREDIT |
| Outside Services |
220.00 |
|
| Misc. Suspense |
|
220.00 |
| To reclassify
|
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|
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See how the journal entry "credit" to Miscellaneous
Suspense offsets the "debit" entry of $220.00 resulting in
a zero balance. |
Miscellaneous Suspense |
Outside Services |
|
220.00 | 220.00 |
220.00 |
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For another example:
Sometimes when you buy equipment you buy it in stages. You
may first put a down payment on the item, and then pay for
installation charges when the equipment arrives. You might even
buy some accessories that have to be attached to the main
equipment. Sometimes you may not know whether certain
accessories are necessary until you try them. Instead of
recording all these different payments to the Office Equipment
fixed assets account, you can use the Miscellaneous Suspense
account to accumulate all the costs until you have a final
figure. This way, when you look into the fixed asset account you
can identify this one piece of equipment as costing one single
amount. For example:
You bought a computer system that cost $7,513. The system
includes a computer for $3,000, a RTO Point-of-Sale Software
program for $2,500, plus installation and accessories. Total
checks written out of your cash disbursements for the system
are: (1) Down payment $500; (2) Installation
charges $1,500; accessories such as special cables, etc. (3)
$234; (4) $76; (5) $123; and, (6) $42. You
returned the (7) $123 item and replaced it with a $161
item. These costs came in over a two-month period, and when the
equipment was finalized, you set up a Note Payable over three
years for the remaining unpaid amount of $5,000 ($3,000 + $2,500
- $500). The Miscellaneous Suspense account would look like
this:
|
Miscellaneous Suspense |
| (1) |
500 |
|
| (2) |
1,500 |
|
| (3) |
234 |
|
| (4) |
76 |
|
| (5) |
123 |
|
| (6) |
42 |
|
| (7) |
161 |
123 |
| sub total |
2,636 |
123 |
| Total |
2,513 |
|
Using the General Journal, you would then transfer this total
amount of $2,513 from Miscellaneous Suspense plus the amount of
the Note Payable $5,000 to the fixed asset GL account called
Office Equipment because that is the full cost of the entire
computer system.
| DESCRIPTION |
DEBIT |
CREDIT |
| Office Equipment |
7,513 |
|
| Notes Payable |
|
5,000 |
| Misc. Suspense |
|
2,513 |
You are probably starting to get the idea now. If you have
made a mistake and need to close the books, put the difference
in Miscellaneous Suspense until you have time to make the
correction. If you find a check has cleared the bank but it’s
not on your register and you have no idea what the check was
written for, use the Suspense account.
You should clear the Miscellaneous Suspense account by the
end of each year, so, make sure you write an adequate
explanation for each entry. This is an accounting technique that
keeps your books tidy and easy to understand when, later on, you
need to remember exactly why and what you did.
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