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Accounts receivable reconciliation

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Accounts receivable reconciliation

This document lists items to review when the accounts receivable aging does not balance to the accounts receivable general ledger account.

Best practice dictates that on a periodic basis, at a minimum monthly, the reconciliation should be performed to catch any issues on a timely basis.

If these reviews do not solve the issue, a journal entry should be made to force the reconciliation. However, this entry should be discussed with your CPA. From a legal perspective, DDI will not tell customers where/how to book entries.

ClosedSpecial Properties of the Accounts Receivable G/L Account

The Accounts Receivable General Ledger account is an internal system account which maintains its balance without direct user posting. Any changes to the G/L balance that are not substantiated by a change in a customer account balance will cause variances.

For instance, when sales on account are invoiced to your customers, the Accounts Receivable G/L account is debited through the Sales Journal. When cash receipts batches are posted the same account is credited through the Cash Receipts Journal. Other transactions such as account adjustments, sales tax credits, bad debt write offs and returned checks also affect A/R in accordance with the "front end" transaction.

Other than an opening journal entry to start the A/R G/L account with a balance, there should not be a need to make any additional journal entries to the account. If the opening journal entry agreed exactly to the net total of converted customer balances (as shown on your opening A/R Aging Report), each successive month end A/R Aging Report should agree to the balance in the A/R G/L account with minimal user intervention.

ClosedIdentifying a Variance
  1. Produce an Accounts Receivable Aging Report by navigating to Accounting > Accounts Receivable > Aging Report. The report is only accurate as of the current point in time.
  2. Obtain the current balance in the Accounts Receivable G/L account by navigating to Accounting > General Ledger > G/L Inquiry. Enter the current accounting period and click Search. You can further refine the results by choosing the A/R G/L account or the group of accounts (if there are multiple A/R accounts).
ClosedFollow these steps to isolate the difference
  1. Determine the ORIGINATION of the difference. Did it start immediately with a mismatched opening journal entry? Compare opening balances by obtaining your conversion A/R Aging Report. This report is generally available on your DDI program server at D: > IBM > ACCOUNTS > DDI > PRINT FILES.
  2. Determine the EVOLUTION of the difference. This is possible by comparing each period end G/L balance with a corresponding A/R Aging Report. Users of Inform Version 17 and higher may retrieve monthly A/R Aging Reports in Excel format at Accounting > End of Month Closing & Journals > Attachments.
  3. Check for year-end adjustments to the A/R account. There may have been some year-end journal entries to the account that are not supported by changes in the sub-ledger detail.
  4. Run a G/L Inquiry for the A/R account. Expand the detail to view the sources of activity. There should be activity for the following source codes only. If there is activity under any other source code, the system will go out of balance. For example, the use of the A/R account is
    • Sales Journal (SJ): When customers are invoiced for purchases, the A/R G/L account is debited. Customer returns post a credit.
    • Cash Receipts (CR): When payment is received on account, the A/R G/L is credited. When a payment is voided, or reversed, a debit results.
    • Finance Charge (FC): Finance charges increase A/R with a debit and a credit to the corresponding income account.
    • Journal Entry (JE): Other than a system-opening entry, there should not be any additional journal entries.
  5. Ensure that PRIOR PERIOD posting to A/R is not allowed. Go to File > Company > Master > Accounting> Allow Accounting Period Change in Accounts Receivable." If this is set to YES, the system will allow items to be "back-posted." thus altering the General Ledger in a prior period, without the ability to rerun the historical Accounts Receivable Aging Report.
  6. Check the G/L Control Table for any changes to the Accounts Receivable specification. Go to Accounting>General Ledger>G/L Control Table to view your settings. If the Accounts Receivable G/L account is coded to an inappropriate field, and a subsequent system re-index has occurred, the A/R G/L balance will be incorrect.
  7. Check Miscellaneous Charge Codes for an erroneous account specification. Go to File>Company>Miscellaneous Charge to review any codes in use. These codes should never point to the A/R account.
  8. Determine if there are any alternate Accounts Receivable G/L accounts in place. A multi-location company with a split Balance Sheet will need to add all G/L account balances in order to agree to a consolidated A/R Aging Report. Some organizations choose to track employee receivables to a different G/L account, while the sub-ledger detail remains on the A/R Aging Report.
  9. Determine if there have been any instances of “frozen” A/R transactions. This situation can occur when one user is performing a function such as cash receipts posting or customer invoicing and another user attempts to close the month. The results are unpredictable and may sometimes cause duplicate or omitted postings. Always restrict the posting of transactions that update the G/L when a month end close is being performed. The only way to determine if there is a record lock is to perform a general ledger re-index. Please read the General ledger re-indexing document carefully since a general ledger re-index can change financial statements. In short, if any general ledger mappings were changed in the system during the year, the general ledger re-index will adjust the change back to the beginning of the fiscal year. See General ledger re-indexing.

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