Creditors’ reconciliation statement is the process by which Creditor/s account (creditor’s transactions in the system) is compared and reconciled against a monthly statement received from the creditor. Once the two records are reconciled, the account becomes payable.
Reconciling The Creditors Ledger Account And The Creditors Monthly Statement
On a monthly basis, a statement showing the transactions that have taken place during the month is received from a creditor. This statement shows all the transactions that took place during the month.
This statement must be compared to the creditor’s ledger account to verify that the details of all invoices and other transactions on it are correct before payment is made. The following are steps followed to verify the accuracy of the monthly statement:
Steps When Reconciling The Creditors Ledger Account And The Creditors Monthly Statement
- Compare the monthly statement against the creditor’s ledger account in the Creditor’s Ledger.
- The debit column of the statement is compared to the credit side of the ledger account and the credit column on the statement is compared with the debit side of the ledger account.
- If there are any errors or omissions in the books of the business receiving the statement, they must be corrected. Verify the entry before recording.
- If the creditor made any errors (arithmetical, omissions), the business receiving the statement must notify the creditor so that the necessary corrections can be made by the creditor.
- They can arrive at the correct balance by preparing a Creditors Reconciliation Statement.
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What To Check If The Creditors Account Does Not Agree With The Creditors Statement
- Invoices omitted/entered incorrectly.
- Credit/Debit notes omitted/ entered incorrectly.
- Amounts paid/ discounts entered incorrectly, e.g. instead of R54, you have written R45.
- Mathematical errors.
- Transactions not recorded or total omission of transactions.
- The creditor may have prepared the statement not aware of direct payments into the bank.
- The creditor may have prepared the statement on a different date from the date on which the business receiving the statement.
- Interest charged by the creditor not taken into account.
If the above differences are experienced, it means that the two need to be reconciled, i.e. the balance as per creditors account in our creditor’s ledger account and the monthly statement that we receiving from our creditor. This is done by opening the Creditors Reconciliation Statement.
Note:
If your account reconciliation reveals that an account balance is not correct, then you should adjust the account balance to match your supporting detail. By doing so, you can always justify your account balances. Also, always retain your reconciliation detail for each account, not only as proof, but as a starting point for account reconciliations in later periods.
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