{"id":28092,"date":"2021-03-25T15:02:33","date_gmt":"2021-03-25T09:32:33","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=28092"},"modified":"2021-03-25T15:02:35","modified_gmt":"2021-03-25T09:32:35","slug":"reconciliation-of-account-receivable","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/reconciliation-of-account-receivable\/","title":{"rendered":"An Outlook on Reconciliation of Account Receivable"},"content":{"rendered":"\n<p class=\"has-drop-cap\">As the small-sized firm owner, you are solely accountable for ensuring that all of your financial numbers are legitimate at the end of the day. From employee payroll to spending budget, your firm income must add up. When your business requires documenting its account balance, this refers to reconciliation accounting. With all of the dynamic elements contributing to your success, business accounting can be quite a cumbersome task. By all means, Reconciliation of account is imperative from the financial standpoint of an organization.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/reconciliation-of-account-receivable\/#Why_Reconciliation_of_Account_is_Important_for_a_Business\" >Why Reconciliation of Account is Important for a Business?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/reconciliation-of-account-receivable\/#What_Are_the_Types_of_Reconciliation\" >What Are the Types of Reconciliation?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/reconciliation-of-account-receivable\/#Sources_of_Reconciliation_of_Account_Receivable\" >Sources of Reconciliation of Account Receivable<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/reconciliation-of-account-receivable\/#Possible_Loopholes_Prompted_After_the_Completion_of_the_Reconciliation_Process\" >Possible Loopholes Prompted After the Completion of the\nReconciliation Process<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/reconciliation-of-account-receivable\/#Things_to_Consider_while_Scrutiny_of_Relevant_Entries\" >Things to Consider while Scrutiny of Relevant Entries<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/reconciliation-of-account-receivable\/#What_is_the_Purpose_and_Correct_Frequency_for_Reconciliation_of_Bank_Account\" >What is the Purpose and Correct Frequency for\nReconciliation of Bank Account?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/reconciliation-of-account-receivable\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_Reconciliation_of_Account_is_Important_for_a_Business\"><\/span>Why Reconciliation of Account is Important for a Business?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Reconciliation of\naccount is an accounting process that actual money earned or spent matches the\nmoney entering or leaving an account at the end of the financial period.\nReconciliation of the accounts is an essential activity for a firm and\nindividual because it gives a chance to identify fraudulent activity and\nmitigate potential errors in the financial statement. <\/p>\n\n\n\n<p>Firms typically conduct\nreconciliation processes at a set period, such as monthly or quarterly, as a\npart of standard accounting protocol.&nbsp;Properly conducted payment reconciliation\nensures a seamless transition between dispute resolution and payment\nprocessing. Any delays in this regard can result in a severe risk of security\nand compliance, fraud, and asset loss.<\/p>\n\n\n\n<p>General ledger records &amp;\nBank statements are the souls of business operations. They keep constant\ntracking of receipts, collections, and outstanding receivables. Operating\nexpenses and payroll have to be checked, posted, and validated at regular\nintervals. Timely reconciliation of account makes sure that the back-end\nprocess and functions are performed effectively.<\/p>\n\n\n\n<p>In the absence of this, businesses can find it hard to identify and correct issues before they become severe. Reconciliation &amp; Dispute resolution initiates as soon as the merchant has commenced the settlement process and meet the customer order. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/manage-accounts-receivable-process-effectively\/\">10 Simplistic Ways to Manage Accounts Receivable Process Effectively<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Are_the_Types_of_Reconciliation\"><\/span>What Are the Types of Reconciliation?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>Five major types of reconciliation accounting are utilized in daily business operation.<\/em><\/strong><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/What-Are-the-Types-of-Reconciliation.png\" alt=\"Types of Reconciliation\" class=\"wp-image-28186\" width=\"543\" height=\"576\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/What-Are-the-Types-of-Reconciliation.png 724w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/What-Are-the-Types-of-Reconciliation-283x300.png 283w\" sizes=\"(max-width: 543px) 100vw, 543px\" \/><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Sources_of_Reconciliation_of_Account_Receivable\"><\/span>Sources of Reconciliation of Account Receivable<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Reconciliation of account receivable is the process of matching the amounts of unpaid billing to the <a href=\"https:\/\/corpbiz.io\/accounts-receivable-services\"><strong>Account receivable<\/strong><\/a> (AR) total stated in the general ledger. This process is crucial because it proves that the receivables figure in the general ledger is justified. The two information sources relating to Reconciliation are as follows:-<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">General Ledger<\/h3>\n\n\n\n<p>There is generally an\naccount present in the general ledger designated for the sole compilation of\nall receivables of the customers. After all transactions recorded in the ledger\nfor a reporting period &amp; the entire subsidiary ledger balances have been\nrecorded, the account&#8217;s resulting balance is the summary total to be validated\nvia Reconciliation.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Receivables Detail<\/h3>\n\n\n\n<p>The comprehensive\nlisting of unpaid billing that should match the ledger&#8217;s resulting balance is\ncommonly goes to the subsidiary sales ledger. To get this detail for\nreconciliation purposes, print the previous AR report as of the final day of\nthe reporting period. The aggregate on this report is then contrasted with the\nreceivable total in the general ledger.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Possible_Loopholes_Prompted_After_the_Completion_of_the_Reconciliation_Process\"><\/span>Possible Loopholes Prompted After the Completion of the\nReconciliation Process<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>After\ncompleting the Reconciliation process, there may be differences present between\nthe two accounts for the given reasons.<\/li><li>A\njournal entry added to the general ledger that skipped the subsidiary sales\nledger. It is one of the common mistakes that trigger the difference.<\/li><li>A\nbilling was mistakenly recorded to an account other than the account of trade\nreceivables. It happens very often since the billing model is set to post total\nbillings to the legit account automatically.<\/li><li>The\nold receivables report was run as of a different date as compared to the date\nused to obtain the balance in the general ledger. <\/li><li>This\nreconciliation of account is primarily carried out as a part of the month-end\nclosing activities before the issuance of the financial statements. If the\nReconciliation is not carried out and some errors are prompted in the general\nledger, this implies a material default in the statements.&nbsp;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Things_to_Consider_while_Scrutiny_of_Relevant_Entries\"><\/span>Things to Consider while Scrutiny of Relevant Entries<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There should be a\nreconciliation of AR at the end of the financial year. Any error related to\nreceivables will be mitigated from the statement before their audit by the\nfirm&#8217;s external auditors.<\/p>\n\n\n\n<p>Any difference that\nexists between the two balances must be scrutinized. The general reason for\nerrors is journal or adjusting entries reported directly in the ledger and not\nexhibited in the subsidiary sales ledger or vice versa. It may also happen due\nto&nbsp;differing cutoff dates of the reports used. Other viable issues are\nincorrectly offsetting client &amp; supplier\u2019s account &amp; recording to the\nwrong ledger account.&nbsp;<\/p>\n\n\n\n<p>When you have pinpointed\nall the errors, make the relevant entries required for the accounts to reconcile\nwith the legit balances. Add a precise detail of the reason for each\ntransaction for the purpose of auditing. Where possible, reverse the invalid\nentry &amp; repost it accurately, instead of posting the difference only, to\nmake the transaction simpler to track. When all entries have been recorded,\nmake sure to reconcile the balances as a final check.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Purpose_and_Correct_Frequency_for_Reconciliation_of_Bank_Account\"><\/span>What is the Purpose and Correct Frequency for\nReconciliation of Bank Account?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>Bank reconciliation is essential for business as it serves the following purposes:-<\/strong><\/em><\/p>\n\n\n\n<ul><li>Identification\nof errors such as calculation mistakes and missed payments.<\/li><li>Keeping\ntrack of bank fees &amp; penalties in the books.<\/li><li>Identifying\ntheft &amp; misleading transactions.<\/li><li>Keeping\ntrack of account payable (AP) and account receivable (AR).<\/li><\/ul>\n\n\n\n<p>Accounts ought to be reconciled whenever you get a <em><strong>bank statement<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Bank_statement\"><em><strong>[1]<\/strong><\/em><\/a><\/sup>. The majority of the firms opt to do this task daily, weekly, and monthly. The best option for your firm is essentially based on how many transactions you do. Knowing the reconciliation process can be helpful and productive both in terms of money and time.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Reconciliation of account identifies how much money your firm has in general checking. To do this effectively, your firm needs to keep records of each &amp; every transaction that comes into existence to compile a reconciliation report. Documents like contracts and invoices come in handy during the reconciliation process. Financial Reconciliation is essential for the growth of your business.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/tips-to-manage-accounts-receivable\/\">Accounts Receivable: Definition and Tips to Manage<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>As the small-sized firm owner, you are solely accountable for ensuring that all of your financial numbers are legitimate at the end of the day. From employee payroll to spending budget, your firm income must add up. When your business requires documenting its account balance, this refers to reconciliation accounting. With all of the dynamic [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":28185,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[128],"tags":[1623],"acf":{"service_id":"297"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":6434,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/28092"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=28092"}],"version-history":[{"count":12,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/28092\/revisions"}],"predecessor-version":[{"id":28188,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/28092\/revisions\/28188"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/28185"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=28092"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=28092"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=28092"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}