How to Reconcile Accounts Payable

how to reconcile account receivable

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Accounts Payable or AP are classified as current liabilities and reported on the balance sheet. In order to close the books at month end and at year end Accounts Payable must be in reconcilement. This can be a very large account or a small one if you are a small business.

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Obtain the general ledger balance or the sum of Accounts payable and the subsidiary ledger balance or the details of AP. These two records must be the same amount in order to reconcile the account.

Use a spreadsheet program to set up the reconciliation of Accounts Payable. Use column A to input the balance of accounts payable as per the general ledger. Use column B to input the detailed balance of accounts payable. If these two match, the account is reconciled. If there is a reconciling difference, there is more work to do before closing the account.

Review items in the detail of accounts or subsidiary that are not in general ledger. Also,

note any items in general ledger omitted from the detail of accounts. Add and subtract these items as appropriate from each record.

Look for possible recording errors to help you reconcile accounts payable.

Find entries that were posted directly to the General Ledger and are not recorded in the subsidiary ledger or the details. Add these entries to the sub ledger side or the reconciliation.

Look for entries in the sub ledger that are not recorded in the general ledger. Add the amounts to the general ledger column of the reconciliation.

Review the entries on the Accounts Receivable and Accounts Payable details or sub ledgers. Make sure that the entries were properly recorded as debits and credits. Common recording errors include: credits to receivables or debits to record payable.

Examine the Cash account entries. Look for credits and debits to Cash instead of Accounts payable.

Make adjusting entries to close the books if the account still doesn't reconcile. If the difference exceeds your company's materiality threshold, continue reviewing all entries until reconciled.


Category: Forex

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