What is Suspense Account?
A suspense account is a temporary general ledger account used to record transactions whose correct destination is unknown or pending verification. It keeps the books balanced while the missing information is investigated.
How It Works
- Post the unidentified transaction to the suspense account so the entry remains balanced.
- Flag the transaction for investigation by the accounting team.
- Once the correct classification is determined, transfer the amount to its final account.
- Reconcile the suspense account at each period end and target a zero balance.
- Document and disclose any non-zero balance that persists at year end.
Saudi Context
Internal control frameworks in Saudi entities — and external auditors registered with SOCPA — treat a non-zero year-end suspense balance as a control deficiency. ZATCA may disallow tax-relevant items that remain in suspense without supporting documentation.
Example
A SAR 18,000 bank deposit appears with no clear source. It is posted to a suspense account, investigated for two weeks, identified as a refund from a supplier, and then transferred to the supplier’s account.