Preparing a creditors Reconciliation Statement

To prepare the monthly Creditors Reconciliation Statements, you need three items:

·       Previous months Creditors Reconciliation Statement.

·       The balanced creditors account in the general ledger.

·       The creditor’s Statement of Account for the reconciliation month.

To prepare the monthly Creditors Reconciliation Statement, you need to follow ten steps:

STEP 1        Tick all the items on the creditors Statement of Account that agree with the amounts in the previous month’s Creditors Reconciliation Statement.

STEP 2        Tick all the items on the creditors Statement of account that agree with the amounts in the Creditors Ledger account.

STEP 3        Enter all the real differences in the correct journal and tick them.

STEP 4        Calculate the new balance for the creditors account in the Creditors Ledger.

STEP 5        Copy the end balance on the creditors Statement of Account to the new month’s Creditors Reconciliation Statement.

STEP 6        Copy the new creditor’s account balance to the new month’s Creditors Reconciliation Statement.

STEP 7        Copy all the timing differences to the new month’s Creditors Reconciliation Statement.

STEP 8        Ensure that all the timing differences on the old Creditors Reconciliation Statement have been reconciled with an item on the creditors Statement of Account.

STEP 9        Any timing differences on the old Creditors Reconciliation Statement that have still not appeared on the creditor’s Statement of Account must be included in the new month’s Creditors Reconciliation Statement.

STEP 10      Balance the new Creditors Reconciliation Statement.

CORRECTING ERRORS OR OMISSIONS AND OTHER DIFFERENCES

Discrepencies	If the fault is in the:
	Creditors Ledger account it must be corrected with a general journal entry	Statement of Account it must be recorded in the Creditors Reconciliation Statement
Outstanding invoices	Debit    what was bought (Trading Stock, Stationery etc.) Credit    the Creditors Ledger account and the Creditors Control account.	Add the amount to the balance due.
Outstanding credit notes	Debit   the account in the Creditors Ledger and the Creditors Control account. Credit  what was returned ( Trading Stock, stationery etc.)	Subtract the amount from the balance due
Outstanding payments	Debit  the creditors account in the Creditors Ledger and Creditors Control account Credit  Bank	Subtract the amount from the balance due
Discounts not recorded	Debit   the creditors account in the creditors Ledger and Creditors Control account. Credit  Discount received	Subtract the amount from the balance due
Correction of errors or omissions	The actual journal entry will depend on the nature of the error or omission.	Subtract the amount if the business owes less than the statement shows. OR Add the amount if the business owes more than the statement shows.
Interest for late payment	Debit Interest on overdue account Credit the creditors account in the Creditors Ledger and the Creditors Control account