Understanding ACH Suspense Accounting
In accounting for ACH, you will need to use more than one G/L account number to show the true history of the accounting activity. You also will need to reconcile key G/L accounts against third-party statements of accounting activity, such as monthly bank statements. How you configure your Chart of Accounts in CU*BASE can be very important to the effectiveness of this process.
Below is a diagram of a simple series of transactions involved in settling ACH. In this scenario:
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The Settlement Account is the G/L account representing the credit union's interaction with a third party, such as a bank or Federal Reserve account. It is used so that the G/L history will match the activity at the third party (bank) to make it easier to reconcile the credit union's bank statement. The final outcome of this account is generally a net change not equal to zero.
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The Clearing Account is the G/L account representing the activity of funds moving from or to a third party to the credit union member accounts. This account shows the offset to both the settlement account and the member account, to represent a total picture of the activity. The final outcome of this account is always equal to zero (that is, the credit union is a pass-through).
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The Suspense Account is the G/L account representing transactions between a third party and the credit union member which require credit union action to determine their final resolution. The final outcome of this account is always equal to zero (that is, the credit union is a pass-through). For ACH processing, this account is 870-11.
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The Member Account is the G/L account representing the total of all member accounts (such as individual share draft accounts). The final outcome of this account is generally a net change not equal to zero.
Sample: Step-by-Step Diagram of ACH Transactions
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731.00 |
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805.00 |
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870.11 |
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902.00 |
|
|
A $ 0 |
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A $125,000 CR |
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A $25,000 DR |
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A $100,000 DR |
|
|
B 0 |
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B 0 |
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B 20,000 CR |
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B 20,000 DR |
|
|
C 5,000 DR |
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C 0 |
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C 5,000 CR |
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C 0 |
|
|
D 125,000 CR |
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D 125,000 DR |
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D 0 |
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D 0 |
|
|
Net: $120,000 CR |
+ |
Net: $0 |
+ |
Net: $0 |
+ |
Net: $120,000 DR |
= 0 |
The credit union receives an ACH debit file of $125,000 to be posted on Day 1.
A The member's accounts are debited for all ACH debits that clear in the initial posting, totaling $100,000, and $25,000 is debited to the suspense account awaiting final settlement.
B The credit union manually clears $20,000 in ACH debits on Day 2, posting to the member accounts, and $20,000 is removed from suspense.
C The credit union requests credit by returning the ACH debits to the settlement institution, causing a credit of $5,000 to the suspense account and a debit of $5,000 at the settlement account.
D The credit union settles for the original amount of $125,000 based on the ACH activity from Day 1, causing a debit to the clearing account and a credit to the settlement account, reflecting the money being moved from the credit union to the third party.
Related Topics
Understanding ACH - Overview and Terminology
ACH Exception Handling: Overview