reconciliation

[djc94]

When reconciling an account checks and deposits that i check off are unchecked when i return to account reconciliation at a later time. Also my accounts payable is showing a balance of 90 in the ledger and 2240 on my balance sheet. Where do i go from here?

[bullfrog]

The checks you've cleared will only appear as cleared in the accounting period in which you cleared them and the accouting periods following that period. If you change the accounting period to a prior month the items will appear open.

[tap1946]

Re accounts payable reconciliation

One of my pet peeves about PT is the ease with which the default A/R or A/P account can be changed. I recognize that many companies run multiple A/R and A/P accounts; but many of us don't. IMHO, I feel that any changes to this account number should be more deliberate. So far, suggestions to PT appear to have fallen on deaf ears.

Anyway, this is important because if you accidentally change this account number when posting a transaction, it will make an entry to the payables detail but post the corresponding general ledger entry to a different account than you expect. This problem is compounded by the fact that once you change this default account, PT keeps on using that account number for every subsequent transaction until you catch your mistake and change it back. It is further compounded by the fact that PT keeps track of the liability account entered for each payable. When you pay an invoice, PT debits the liability account that was used when the particular payable was set up. So, if you entered an incorrect liability account, paid the invoice in the same month, and only looked at your A/P aging at month-end; you wouldn't see the error. Everything would have cancelled out and the G/L and aging would balance. If you run an aging report at any period of time where such an invoice is still open (and you have specified your normal default A/P liability account) you will encounter an out-of-balance condition. Assuming you are only using one payables account; one way to test for this problem is to run a G/L listing for the payables account you are trying to reconcile, then run an A/P aging report for that particular account, and then run it again with no account number specified. If the two aging reports come up with different totals, then you have this problem. Comparing the two may lead you to the offending entries which can then be edited with the proper liability account number. If neither aging report agrees with the ledger, see the next paragraph.

The other thing you need to look for is entries to the G/L account that do not create corresponding detail entries in the Accounts Payable subsidiary ledger. An erroneous manual journal entry for example. All of the entries affecting your payables account should be through purchases or payments in order to also affect the subsidiary ledger.

From the magnitude of the numbers you referenced in your post, it doesn't sound like you have a high volume of data so finding the errors and correcting them shouldn't be too much of a task for you.

If you have been out-of-balance for a long time (back into accounting periods that are now closed) you may no longer have access to those records in PT and would be forced to make corrections via appropriate adjusting journal entries.

Tom

[awisnia]

djc:

Make sure to hit the "OK" button when leaving the reconsiliation screen - that will save the check marks. If you just close the box, all work is lost. If that's not it - something's very strange.

Re: the A/P Issue - my guess is something posted accidently to the A/P account from someplace you did not mean it to. Run the Ledger for the A/P account - anything that didn't post from the CDJ or PJ is probably the culprit.

Remember, the A/P report is only taking selected items from the A/P account. Ledger entires that are not from the Purchase Journal will not be added to the total in the aging report....(I think!!)

Tap:

Couldn't agree more on idiot proofing the A/P account change in receipts task. Been on many a hunt for misplaced transactions in the past. (Similar issues for the A/R field in invoicing and bank account in payments)

At least give me an option to default to an account on each new transaction, rather than cloning the mistake for all future posts until noticed...

adam

[tap1946]

awisnia

This issue gets very complicated when the offending transaction(s) carry over month end and you are trying to reconcile the A/P account at the end of the month. For each erroneous transaction, you have to determine if it cleared (was paid or cash was received, etc.) at the time you are trying to do a reconciliation. If it hasn't you have a reconciling item to be corrected or dealt with in an "off book" reconciliation. If you have payables that don't get paid in 30 days like I do, these errors can extend over several accounting periods and be at differing brackets on a time line. I have been in the hunt too many times - usually several times a year - and it's no fun. VERY wasteful of my valuable time.

I brought this issue up to PT on two separate occasions with a very weak response. My suggestion was to have PT pop up a dialogue box anytime the default A/R or A/P account was changed; or to make it alterable only via a pre-set drop down box with a capacity of 6,8,10 accounts or whatever. I lean toward the dialogue box warning. You're right, having the same thing on the cash account would be a godsend too. Are you listening PT?

Tom

[awisnia]

Tap -

How do you "reconsile" an A/P account??

Perhaps I'm missing the semantic..?

adam

[tap1946]

adam

Is this a serious question?

Tom

[awisnia]

Yes,

Again, maybe I'm just missing the lingo....

We reconsile the checking accounts to verify the transactions, but really don't have any particular month-end process for the a/p.

Maybe we should, but I'm an engineer, not an accountant - and tend to take the most efficient path to the answers that really matter...

adam

[tap1946]

awisnia

Well, I'm an engineer-to-be (changed majors after three years of engineering school) turned accountant, so I guess I look at things a little differently.

A sophisticated accounting system will normally have certain General Ledger accounts supported by some type of subsidiary information. Inventory, accounts receivable, and accounts payable are the most notable, but there can be others. Inventory detail and valuation reports, and accounts receivable and accounts payable aging reports can be considered the subsidiary information. While there are always exceptions to any arbitrary rule a person can create; it is generally accepted accounting practice that subsidiary ledgers total to their corresponding General Ledger account balance. For most smaller businesses, there will be a single General Ledger account for inventory, A/R, and A/P respectively.

Apart from the simple fact that you may be carrying a discrepancy in your accounting system; how do you know which figure is correct, the G/L balance or the detail balance, if you don't "reconcile the account". By that, I mean going through the detail entries and finding the errors that cause the aging report balance to differ from it's corresponding general ledger balance. In the case of accounts receivable or accounts payable, it will almost always be that the default account has accidentally been changed on some postings (as I have discussed at length on this board before), or an extraneous journal entry has posted from a source that does not make an entry to the subsidiary ledger (usually a manual general ledger journal entry).

Do you have to reconcile accounts? You don't have to, but if you don't, how do you know what figure to believe? Certainly, materiality comes into play. If your company has lots of money and doesn't worry about its payables and receivables too much, maybe its' just not that important to you and you can ignore it for long periods of time. For a company whose finances are tight though, it might avoid a lot of very unpleasant surprises. I guess it would also depend on who's looking over your shoulder. If you're required to give accurate financial statements to a bank or home office, this type of error could become a political hot potato. I own my own business and the financials we generate are almost exclusively for internal management purposes. Because I hate to do taxes, I do have an outside accountant prepare my finalized year-end financials for tax, do my 1120, and my personal property tax return. So, at year-end I always make sure A/P, A/R, and Inventory are reconciled to the penny no matter how much time it takes.

To avoid a more lengthy reconciliation process at year-end, I usually reconcile A/P and A/R 2-3 times throughout the year. More often may be appropriate to your particular situation. If I ever get any spare time, I may reconcile some other accounts periodically too.

At year-end, in addition to the accounts previously discussed here, I also reconcile Amounts Due From Employees, Prepaid
Expenses, all fixed asset and accumulated depreciation balances from the Fixed Asset module to their respective G/L accounts, all payroll figures generated by Paychex to the payroll related general ledger accounts associated with entering payroll into PT, and all short-and long-term liability accounts not previously reconciled. Reconciliation is to off-book spreadsheets and/or third-party documents. All cash accounts are reconciled to their respective bank statements each month. Business credit lines are reconciled to their respective supplier statement balances periodically.

Without such a reconciliation process in place, either continously or at reasonable intervals, the integrity of your financial information is compromised. Only a company's auditors and management can determine whether such compromise is material.

Hope this gives you some insight to judge your particular situation.

Tom

[awisnia]

Thanks Tap -

On the same page now..

Make sure the customer/vendor ledgers match the a/r - a/p g/l balances.

Mine don't but they haven't in a long time....

A/R is $1,200/545,000 off balance.
A/P is $200/379,000 off balance.
We don't use the inventory valuation in PT, we do physicals.

I too chase pennies when reconsiling the cash accounts - will not rest until I find them.

But, I've never really worried about the a/p - a/r.

I guess I always assume that Vendors *always* find us if we owe and customers *usually* send checks - these two factors make me believe that 99% of these errors flush themselves out of the woods.

Unfortunately, I think my blissfull ignorance has been shatered - looks like it's time to have someone keep an eye on it.


Cheers,

adam

[tap1946]

adam

I'm sure I do more reconciliation than most, partly because I am able to. I fall into the category where finances are always tight, so accurate numbers are a must with me. Up until 12/31/02, I had outside financing related to the original purchase of the business that required me to submit accurate financials prepared by an independent third party - in my case a CPA firm.

All of our work is individual custom jobs, so we use the job tracking feature to constantly see how we are doing on gross margins. That entails a lot of inventory transfers for materials and supplies. We also use time ticket accounting for input to our payroll and for job tracking, which also entails a lot of data entry. The raw results on the job reports are supplemented with overhead figures computed from selected G/L accounts. But the results we have, be what they may, are critical to everyday decision making. So I just got used to a lot of data entry and a lot of reconciliation. It was hard at first; but we pretty much have it down to a science.

Everybody's clientele is different; but in my business it seems like the people who are owed money do indeed seek you out if something goes astray. And it doesn't take them long. My experience on the A/R side is not so positive. If I'm not chasing my customers, I often don't get paid. My concern with A/P errors is the vendor that comes back to me looking for payment on an invoice I wasn't aware of at a time when cash flow is tight. My jobs are usually bigger, so I tend to have an erratic cash flow. I much prefer to pay bills on my schedule. A/R is not so much of a problem except I can't afford to "lose" a receivable because I am unaware of it and the customer turns out to be less than scrupulous. When we were smaller, I had hands-on experience with every job. Now we have more people involved, and I may or may not be involved with a particular project. We try to double check ourselves by using P.O's on the A/P side and S.O.'s on the invoice side. Gives us at least some safety net.

I'm rambling; but sometimes it's interesting to have other people describe their businesses, how they handle their accounting, and any problems they are wrestling with.

Only you can examine your particular situation and determine how much resources you can or want to apply, what you want your financial system to do for you, and how much variance you can tolerate. Unfortunately, bliss has a tendency to creep up on you when you least expect it.

Tom

[awisnia]

Unfortunately, the bliss has a way of sneaking away as well!

Adam

[CynthiaJ]

Hello Bullfrog: Regarding your post to Reconcilation post: My question: if you open an early period, why would one see a check for a later period. Shouldn't just the AP and AR with dates of that accounting period show?
Thanks for the clairification.