Creditor's Reconciliation Statement.ppt

Introduction to creditors reconciliation

1. GRADE 11
ACCOUNTING
MODULE 1
LESSON 9

2. RECONCILIATION
S
Businesses that buy & sell on credit keep a
Creditors Ledger which contains the individual
accounts of each creditor

3. Creditors Ledger contains:
Opening balance
Invoices issued by the creditor for purchases made
Returns
Allowances
Payments made to the creditor
Discounts received
A copy of the account is received from the creditor
supplier at the end of the month
Presented in 3 column format instead of T account
RECONCILIATION
S

4. Creditors list is prepared @ end of month
Summary of all balances owed
Balance of list must balance with Creditors control
balance
Can draw up control balance from list balances
If want to know how much we owe an individual
creditor, check individual Creditors Ledger
If want to know the totalyou owe all your creditors
you look at the Creditors Control account
RECONCILIATION
S

5. For control purposes the control accounts must
always be in balance with the Creditors List
In many instances they don’t balance
○Have to investigate
Examples of reasons why:
○Errors in posting (in journals, to ledgers or to control
accounts)
○Wrong amounts entered when posting
○Transactions have not been processed
Errors or omissions may impact:
○Control account
○Individual account
○Or BOTH
RECONCILIATION
S

6. RECONCILIATIONS -
example
Date Details F Dr(-) Cr (+)Bal
May
1Balance b/d 4 200
8Invoice no.25 CJ 5 100 9 300
10Chequeno.100 CPJ 1100 8 200
15Debit note no.12 CAJ 500 7 700
25Invoice no.33 CJ 3 600 11 300
28Chequeno.110 CPJ 4 200 7 100
CREDITORS LEDGER OF RAYNE WHOLESALERS
CREDITOR: SWART SUPPLIES

7. RECONCILIATIONS -
example
Date Details Dr(+) Cr (-) Bal
May
1Balance 4 200
8Invoice no.25 5 100 9 300
10Receiptno.88 1100 8 200
Discount allowed 100 8100
15Credit note no.20 500 7 600
25Invoice no.33 3 600 11 200
28Invoice no.34 600 11800
STATEMENT FROM SWART SUPPLIES
ACCOUNT: RAYNE WHOLESALERS
According to SWART SUPPLIES we owe them R11 800 but
our Creditors Ledger shows that we owe them R7 100
The differences need to be determined and corrective action
taken

8. RECONCILIATIONS -
example
PROCEDURE FOR RECONCILIATION
Mark off on both accounts all amounts that are
the same.
○Remember the amounts will be on oppositesides
Determine why the other entries do not agree and
correct them
○Problems in the Creditors Ledger corrected in our
books and affect the Creditors Ledger
○Problems on the Statement are corrected on the
Creditors Reconciliation Statement

9. RECONCILIATIONS -
example
Date Details F Dr(-) Cr (+)Bal
May1 Balance b/d 4 200
8 Invoice no.25 CJ 5 100 9 300
10 Chequeno.100 CPJ 1100 8 200
15 Debit note no.12 CAJ 500 7 700
25 Invoice no.33 CJ 3 600 11 300
28
Chequeno.110 2
CPJ 4 200 7 100
CREDITORS LEDGER OF RAYNE WHOLESALERS –
CREDITOR: SWART SUPPLIES
Date Details Dr(+) Cr (-) Bal
May 1 Balance 4 200
8 Invoice no.25 5 100 9 300
10 Receiptno.88 1100 8 200
Discount allowed 1 100 8100
15 Credit note no.20 500 7 600
25 Invoice no.33 3 600 11 200
28
Invoice no.34 3 600 11800
STATEMENT FROM SWART SUPPLIES
ACCOUNT: RAYNE WHOLESALERS

10. RECONCILIATIONS -
example
1.Discount of R100 on statement
1.Enter the discount in the GJ
2.DrSwart Supplies, Cr Discount received
3.Post to CL
2.Chequeno.110 for R4 200 in ledger
1.Subtract from total on statement
3.Invoice no.34 for R600 on statement –it
came to our attention that these goods were
sold to SayneWholesalers and not us
1.Subtract the amount from the statement total

11. RECONCILIATIONS -
example
DateDetails F Dr(-) Cr (+)Bal
May
28Balance –BEFORE ADJ b/d 7 100
Discountreceived 1GJ 100 7 000
CREDITORS LEDGER OF RAYNE WHOLESALERS –
CREDITOR: SWART SUPPLIES
CREDITORS RECONCILIATION STATEMENTat 31 May 2008
Details Bal
Balance –BEFORE ADJ fromStatement 11 800
Chequeno.110 outstanding 2(4200)
Invoice no.34 error 3(600)
Balance as per ledger 7 000

12. or
CREDITORS RECONCILIATION STATEMENTat 31 May 2008
DR CR
Balance asper S.Swart’sstatement 11 800
Chequeno.110 outstanding 2 4200
Invoice no.34 error 3 600
Balance as per Creditors Ledger account 7000
1180011 800