Accounts Reconciliation Blog

Accounts payable are the unpaid bills of a business or a household. This is the money owed to suppliers and other creditors. The sum of these amounts is to be listed as a current liability on your balance sheet. Control your expenditures and payable by making using of accounts payable ledgers.

Maintain accurate ledgers and learn how to reconcile accounts payable so you will find it easy to double check the bills you get from your suppliers. At the end of the month, reconcile your accounts payable ledgers with the accounts payable control account. The latter is the total accounts payable balance from your general ledger.

Running a business is no joke. If you have a creative background, you will still need to hire an accountant to handle your expenses. If you can’t afford an accountant then you will have to learn the basics of accounting to keep track of your cash flow. You have to keep track of your accounts receivable and your accounts payable. You must also learn how to reconcile accounts payable so that you do not default on your payments.

Here is a crash course on how to reconcile accounts payable: You must have a separate ledger detailing all that is under your accounts payable. There are spreadsheet programs that you can use to help you reconcile accounts payable. You can use one column to place all the details of the accounts payable. The column where you have your accounts payable must match the ledger where you have the details of your due payments. Be sure to check for errors in case they do not match. If all is done, post the entries to the general ledger. Check if the accounts receivable are enough to cover the accounts payable. Do adjusting entries on the journal if needed.

The challenge to all accountants is to present a balanced statement at the end of each recording period which is usually monthly. We know that accountants can extend work deep into the night when they are working on the balance sheet account that can include accounts payable reconciliation, cash reconciliation and all other reconciliations needed to present a balanced statement. Reconciliation is the process of comparing the contents of an accounts ledger with other related sources. Differences caused by the timing of transactions, such as outstanding checks, are identified as reconciling items.

There are definite steps to be taken in a reconciliation process. It will involve examining and re-examining accounts and comparing them with other documents. These could be internal data such as cash accounts or external documents such as bank statements. Cash accounts are reconciled against a bank statement. Accounts receivable and accounts payable are reconciled against aging schedules. Inventory and fixed assets can be reconciled against a physical count.

The success of a business can be attributed to a very good financial statement. This paves way to a smooth operation of the business. Therefore, constant accounts payable reconciliation should be practiced by any organization. It plays a very vital role in increasing the profit margins of a company. This eliminates the penalty costs brought by delayed or duplicate payments.

Since accounts payable reconciliation greatly contributes to business growth, it should be done perfectly and accurately. This is usually done by comparing the listings on general ledger and subsidiary ledger. General ledger takes the total amount or sum of accounts payable while subsidiary ledger contains the detailed information of the account. Their values should match all the time. Should there be discrepancies, thoroughly review items and try to spot if possible recording errors were made.

In every business, it is important to reconcile balance sheet accounts at the end of every period as part of the closing process. This could be every month, quarter, or year-end. By doing so, you will be able to identify if there are any errors before closing. You have to do accounts payable reconciliation and accounts receivables reconciliation.
 
The balance sheet account reconciliation is the comparison of the account’s general ledger trial balance with another source. It could be internal like a subledger, or external like a bank statement. Differences in the timing of transactions, such as outstanding checks, are identified as reconciling items.

Every business needs a chart of accounts to smoothly run the accounting department. Below is a list of the different accounts.

1 – The assets accounts include any income or property owned by the business. This include bank accounts, accounts receivable, the land if owned and building, any vehicles, supplies, furniture and machines including computers.
2 – The liability accounts are any money that the business owes. This includes accounts payable, any taxes owed and if there are any bank loans.
3 – The revenue accounts include any sales revenue, sales discounts, sales returns and allowances and any interest income.
4 – With the expense account any business expenses go in here. This includes bank fees, depreciation expense, rent expense, income tax expense, utilities, advertisement costs and payroll tax costs.

These are all used in the accounts payable reconciliation which is done monthly.

A bank reconciliation is done when you receive a statement from the bank. If you are handling the accounting for a small business this is what you need to know about bank reconciliation. There are two basic types of bank reconciliation. The first one is reconciling not requiring  adjustment on the books and the second one is reconciling requiring adjustment on the books.

The reconciling items that do not require adjustments are bank errors, outstanding checks and deposits in transit. The reconciling items that do require adjustment are errors in the cash account, unrecorded returned checks (NSF), unrecorded bank charges and unrecorded bank collections.