DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

Opening balance in cash account creates entry under Suspense


#1

I created cash account and put opening balance using using conversion balances but the balance shows in Suspense under Equity which I am unable to understand can you tell me what I am doing wrong?


#2

Well. This is one of the principles of double-entry accounting. For every debit, there must be a corresponding credit.

So when you set opening balance of cash account to $5,000 - that’s debit. Now, you should also set opening balances for rest of your accounts otherwise the difference - credit, will be put into Suspense account to make sure your books always balance.


#5

Hi Lubos,

I have the same situation as Vikram above. But I only have two accounts “Main” and “Tax”, are you saying that I should reconcile the opening balance figure (debit) with a credit in the “Tax” account of the same amount so that “Suspence” show zero balance?

Sorry but I am not an accountant so I don’t really understand this as I obviously do not want that amount to be shown in my “Tax” account could you please explain.


#6

No, this has nothing to do with reconciliation.

Have a look at this guide: http://www.manager.io/guides/miscellaneous/setting-up-opening-balances/

It explains how to set opening balances so nothing is posted to Suspense account.


#7

Sorry, that was my sloppy use of accounting terminology, forget “reconciliation”.

I am still not sure what to do with the opening balance. Should I make a “Control Account” to input a credit of the same amount as the opening balance in my main bank account?

Or should I credit the “Capital Account” with the same amount and view it as a personal capital injection as this will have no bearing on my business accounts before this date? Also, I should not that I am a sole trader.

Also note that I have not been using the ‘Journal Entries’ method for inputing my accounts, I am using the ‘Bank Accounts’ “Receive Money” “Spend Money” method for recording the accounting.


#8

@lubos Lubos, I created opening entries as the guide says. If I run a Balance Sheet Report in Accrual Basis, Accounts Receivable looks correct. However if I run the Cash Basis Balance Sheet, the Accts Receivable amount shows in the Suspense Account. Is that what it should do?


#9

Accounts receivable does not exist in cash basis. This is because cash is earned as received.

Accrual-basis

Issuing sales invoice

  • Accounts Receivable 1,000 Dr
  • Sales 1,000 Cr

Getting paid for invoice

  • Cash at bank 1,000 Dr
  • Accounts Receivable 1,000 Cr

Cash-basis

  • Cash at bank 1,000 Dr
  • Sales 1,000 Cr

Difference is due to timing of revenue recognition hope this helps.

For the opening cash account it is assumed your 5,000 balance in cash came from somewhere and as the owner u prob put it in so u would credit an equity account depending on entity type.

Your balance sheet would reflect 5k cash on the asset side. And 5k is your ownership owner equity side.

Accounting equation is Assets = Liabilities + Owner’s equity.


#10

@schragejordan, thanks for that.

Having done some brief research on this matter and with the help of your simple explanation, I think I have it sorted.

I have credited my “Capital Account” (equity account) with the same opening balance as my main Bank Account this has removed any sums showing up in “Suspence”. I guess this works fine for me as I am the sole trader/owner of the business.

Thanks for that.


#11

@lubos, I also did in the same way as @Jason. Is it correct?


#12

Answer the following question to locate what account to credit.

A.) Did the cash come from debt?
B.) Did the cash come from owner?

Yes to A.) means you have a liability and should credit a liability account. note payable as an example.

Yes to B.) then equity account of the contributor would be appropriate. If the contributor is not the owner that is debt.


#13

This was a bug. Fixed in the latest version (14.12.25).


#14

As @schragejordan says, it depends on your circumstances. Generally, after you set opening balances for all your assets and liabilities, any left-over can be assumed to be owner’s capital therefore @Jason solution is OK.


#15

Ok I did as it ask but I dont have anything that says opening balances.


#16

@Wornout, you are reading a thread that describes things from probably more than 100 versions ago. Some things have changed since then. Please describe exactly what you are trying to do and what problem you had.