In this article, we will discuss in detail how to prepare a statement of reconciliation of accounts payable. This document is crucial in all types of businesses as it serves as the basis for authorities to verify if the payment process has been carried out correctly.
I. What is Accounts Payable? Classification of Accounts Payable
To answer the question “What is a Statement of Reconciliation of Accounts Payable?” we need to first understand the following:
1. What is Accounts Payable?
In the field of accounting, accounts payable can be simplified as follows:
“When a business has transactions that generate the need for payment during a period, such as buying and selling products, goods, or providing services, or incurring payment obligations to individuals, organizations, or other businesses, but cannot make immediate payments, these amounts are considered Accounts Payable.”
The person responsible for monitoring these accounts with clients is called an accounts payable accountant.
2. Classification of Accounts Payable
Accounts payable can be classified into two main types: Accounts Payable and Accounts Receivable.
Accounts Payable includes all amounts that need to be paid to suppliers of raw materials, supplies, equipment, tools, services, products, etc., which the organization or business has not paid immediately upon completion of the buying and selling transaction.
Accounts Receivable includes amounts collected from sales of goods, products, and services to customers, but not yet fully received, or financial investments of the organization or business.
Note: Accounts payable accountants must monitor and classify these accounts by specific entities, separate them, and classify them correctly into groups of entities (suppliers, buyers, employees, any business, etc.) to effectively control accounts payable and avoid any oversight or loss.
In addition to the main accounts payable types mentioned above, the accounts payable accountant also needs to monitor other accounts payable such as:
- Internal payables
- Payments to the government
- Payments to employees (salaries, allowances, commissions, etc.)
- Other accounts payable, such as internal collection accounts, compensation or deduction of employee salaries for losses or damages, advances, etc.
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II. What is Accounts Payable Reconciliation?
Accounts payable reconciliation is the process of comparing a business’s accounts payable records to the figures on the company’s contracts and actual transactions. During the reconciliation process, the company must collect evidence confirmed by relevant parties to validate the accuracy of the figures in the accounts payable records.
Accounts payable accountants update these accounts promptly when there are new transactions. At the end of the month, they consolidate and reconcile the data with the accounts payable entities. If the accounts payable between the two parties match, the accountant will proceed to close the report, and the accounts payable accountant will urge the entities to make timely payments for the outstanding debts.
However, if the payment is not made within the accounting period, the accounts payable will continue to be recorded in the account 331 and transfer the balance to the following period for further monitoring.
III. Principles and Process of Accounts Payable Reconciliation
1. Principles of Accounts Payable Reconciliation
The accounts payable reconciliation report is essential for business operations as it is directly related to tax reporting and payments to state authorities. Therefore, to create a complete and legally compliant accounts payable reconciliation report, accounts payable accountants need to keep in mind the following principles:
- First, meet the requirements regarding the subject and entities involved in the accounts payable reconciliation process as regulated by the law.
- Second, the principle of accounts payable reconciliation is “mutual consent, fairness, equality, goodwill, cooperation, honesty, and mutual respect between parties.”
- Third, the content of the accounts payable reconciliation must comply with legal regulations and not contradict social moral values.
- Fourth, the accounts payable reconciliation must be documented in a statement called the Accounts Payable Reconciliation Statement. This statement is established as a basis for verifying and examining the payment status of financial obligations of the parties involved.
2. Steps in the Accounts Payable Reconciliation Process
Step 1: The accounts payable accountant prepares the necessary documents, including:
- For accounts payable: Accounts Payable Reconciliation Statement, Detailed Accounts Payable Ledger, Accounts Payable Notification to send to the buyer for reconciliation and verification of accounts payable figures.
- For accounts receivable: Accounts Payable Reconciliation Statement, Detailed Accounts Receivable Ledger, Accounts Receivable Notice to send to the seller for reconciliation and verification of accounts receivable figures.
Step 2: If discrepancies occur, make the necessary adjustments to match the figures with the actual transactions.
Step 3: Keep the confirmed Accounts Payable Reconciliation Statement for the supplier (buyer) to facilitate financial reporting for the company at the end of the period.
IV. What is the Accounts Payable Reconciliation Statement?
The Accounts Payable Reconciliation Statement is a document created to verify and confirm the payment status of the buyer. This statement helps the company to understand the outstanding debts within the accounting period and classify the debts into different groups. From there, the company can take appropriate measures to handle the accounts payable in accordance with legal regulations.
The purpose of preparing the Accounts Payable Reconciliation Statement is as follows:
- The Accounts Payable Reconciliation Statement is an important document for settling and paying taxes to the state authorities.
- It is used to check the payment status of goods between the supplier and the buyer, especially invoices with a value of ≥ 20 million VND, to determine if the parties involved have complied with the regulations and agreements.
- It helps the accountant to consolidate and control the payment status of the company’s outstanding debts and the remaining receivables from customers, whether they comply with the content of the signed contract or not. It also ensures that the remaining debt matches the figures in the books.
The Accounts Payable Reconciliation Statement must include the following basic information:
- Company name
- Accounts Payable Reconciliation Statement number
- Address and time of the accounts payable reconciliation
- Basis and documents that constitute the reconciliation statement
- Information about the buyer and the seller
- Details of the accounts payable figures
- Final conclusion on the accounts payable
- Representatives of the buyer and the seller’s signatures and stamps
Note:
- The information in the reconciliation statement must be complete and compliant with legal regulations.
- This accounts payable reconciliation statement is only legally valid when both the buyer and the seller sign and stamp it. Alternatively, if someone signs on behalf, they must have proper legal authorization from the company.
V. Latest Regulations on Accounts Payable Reconciliation
Legal provisions on accounts payable reconciliation stipulate that when two parties have completed the payment transaction, the business needs to prepare a contract liquidation statement. If the payment term specified in the contract has passed, and the buyer has not made full payment, another accounts payable reconciliation statement needs to be prepared, clearly indicating the term, transaction amount, and end date.
Depending on the situation of each company, the accounts payable reconciliation statement may vary slightly. However, in general, this document should include the following:
- Company name
- Accounts Payable Reconciliation Statement number
- Address and time of the accounts payable reconciliation
- Basis and documents that constitute the reconciliation statement
- Information about the buyer and the seller
- Details of the accounts payable figures
- Final conclusion on the accounts payable
- Representatives of the buyer and the seller’s signatures and stamps
VI. Tips for Creating an Accounts Payable Reconciliation Statement
In the process of creating an accounts payable reconciliation statement, accounts payable accountants often make the following mistakes:
- Accounts payable accountants send confirmation letters to customers, but the response rate is very low, leading to errors and loss of accounts payable management.
- Discrepancies occur between the accounts payable reconciliation statement and the accounting ledger regarding accounts payable.
- There are cases where accounts payable reconciliation doesn’t happen, and the parties involved are not clear, especially in the construction business and contractors.
For more information, see:
- Sample of an Incorrectly Written Invoice Adjustment Statement
- Guidelines for offsetting accounts payable
- Detailed description of the accounts payable accountant’s job in a company.
Conclusion
In this article, we have shared knowledge and information about what an accounts payable reconciliation is, the principles of accounts payable reconciliation, the concept of an accounts payable reconciliation statement, as well as the latest sample for you. We hope this information will be useful for your accounting work.
This content is also covered in detail in both online and offline accounting courses offered by the Kienthucykhoa.com center, which is taught by experienced accounting professionals. If you need any assistance, please feel free to ask your questions by commenting on this article.
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