How do you reconcile AP subsystem ledger accounts?

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Reconciling an account can depend upon the type of account and its relationship to the sub-ledger system. In general, here are some steps to consider when you are reconciling between a general ledger account and a sub-ledger account:

 

  1. Start with an ending balance in your sub-ledger account system. When reconciling there can be the following differences between your general ledger and sub-ledger system: Journal entry debits or credits made in the general ledger system that are not made to your sub-ledger system. These entries are generally accruals to properly record liabilities or vendor credits not yet entered into a sub-ledger system but need to be recorded in order for the company's financial records to be in compliance with Generally Accepted Accounting Principles (GAAP). (See our research about GAAP explained in our case study Focus on the Basics to Build Good AP Practices and our glossary of definitions.
  2. System journal entries from various sub-ledger systems (e.g., material vendor purchase sub-ledger system, p-card sub-ledger system, disbursement sub-ledger system) that feed into a single general ledger account
  3. You may also have manual check payments that are not processed through your sub-ledger system and are manually entered as a journal entry to the general ledger. This often happens when you have "rush" checks, or pre-payments for "cash on delivery" or advance deposits, and you have not yet entered these payments to your sub-ledger system until after the end of your month end close.

A simple reconciliation worksheet may look as follows:

Balance per the sub-ledger account $XXX
Add: J/E for accruing expenses to GL $XXX (+)
Deduct: J/E for manual checks paid $XXX (-)
_______________________________
Balance per the General Ledger $XXX


We have a template on the site that is a reconciliation tool that you can use when reconciling vendor statement balances to a vendor account balance in your AP system. This template can be modified or used as is for reconciling the differences between a general ledger balance versus a sub-ledger balance at the end of a period.

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