Accounts Receivable Reconciliation

Written by Patricia Tunstall
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Reconciliation is a standard accounting method to ensure continuing accuracy of "the books." Depending on the size and complexity of the business, an accounting department may keep a general ledger that is a running entry of each transaction. Accounts receivable and accounts payable are two important entries that must be reconciled with various statements so there is agreement.

Accounts receivable reconciliation involves comparing and adjusting the differences between two items. These could show up in balances, amounts, statements, or accounts. Any differences will probably need to be explained because discrepancies in accounting are critical. Whether receipts have been misplaced or erroneous figures entered, reconciliation must be successful as soon as the disagreement between the two items is discovered.

Expenditures and Invoices

Unless a business can keep accurate books, it will founder in a short time because it has no way to track the credit it has extended (invoices) or its expenditures (payables). Such an enterprise is perpetually in the dark about its financial status, and about the direction it should take. Basically, it lacks management and becomes a catch-as-catch-can operation.

On the other hand, an accounting system that follows standard practices by consistently reconciling accounts receivable with other financial statements will be aware of strengths and weaknesses in the business. If the owner or manager needs a daily or weekly report on the amount of accounts receivable (extended credit), a precise statement can be produced. Because accounts receivable and inventory have such impact on cash flow, a manager can monitor them carefully when all financial items are reconciled and adjusted.


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A/R Reconcliliation

You need to provide example how to do the task..just talking implies bsing.