A suspense account is a temporary holding account used when you cannot immediately determine the correct account for a transaction. Items should be cleared promptly.
Suspense accounts are temporary parking spots for transactions that cannot be immediately classified. Common reasons for using a suspense account include: unidentified bank deposits, transactions where the correct account or cost centre is unknown, partial payments that need investigation, amounts received on behalf of others pending clarification and timing differences between receiving information and being able to classify it. The key principle is that suspense accounts should be temporary - every item should be investigated and moved to its correct account as soon as possible. A growing suspense account balance is a red flag indicating bookkeeping problems. Month-end and year-end processes should include clearing all suspense account items. In Xero, you might use a designated suspense account or the system's default 'Ask My Accountant' category. SortBooks reduces reliance on suspense and catch-all accounts by suggesting the right account for transactions sitting there, ready for quick human approval.
SortBooks helps with the bookkeeping behind suspense account by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing suspense account by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
The chart of accounts is a structured list of all accounts used in your accounting system to categorise transactions. It defines the categories for your income, expenses, assets, liabilities and equity.
Transaction categorisation is the process of assigning each financial transaction to the correct account in your chart of accounts. It is the core activity of bookkeeping.
Reconciliation is the process of comparing two sets of records to ensure they agree. Common types include bank reconciliation, accounts receivable reconciliation and intercompany reconciliation.
The month-end close is the process of finalising all accounting activities for a month, including reconciliation, adjustments and report preparation.
The general ledger is the master record of all financial transactions in a business, organised by account. It forms the basis for preparing financial statements.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.