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.
Bank reconciliation process is targeted to validate the bank balance in the general ledger and explain the difference between the bank balance shown in an organization's bank statement. Learn the reasons for existence of differences between the two.
Have you ever wondered what is actually a Bank Statement and why it is needed. What is the information that is available in a bank statement?
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!
The objective of funding Management is to implement strategies that lead to the best borrowing rates and lower investment costs. Learn how treasury aids in loans and investment management functions.
Bank Reconciliation is a PROCESS to Validate the bank balance in the general ledger With Bank Statement. Learn the bank recon process.
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.
Introduction to Cash Clearing Process
Unravel the mystery behind clearing accounts. Learn why clearing accounts are used in finance and accounting. Learn why so many clearing accounts are defined in ERPs and Automated Accounting Systems.
What is Invoice to Cash Process
In this article, we will explore the business process area known as; Invoice to Cash; Also known as I2C. Learning objectives for this lesson are: Meaning of Invoice to Cash Process; Sub Processes under Invoice to Cash; Process Flow for Invoice to Cash; Key Transactions Fields; Key Setups/Master Data Requirements.
Complete Bank Reconciliation Process
Bank Reconciliation Process is a eight step process starting from uploading the Bank Statement to finally posting the entries in General Ledger. Learn the Eight Steps in Detail!
© 2023 TechnoFunc, All Rights Reserved