I am really passionate about accounting.
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Chapter 4 –
reconciliations:
creditors
reconciliations
LEARNERS SHOULD BE ABLE TO:
Reconcile bank statements with cash journals in order to prepare bank
reconciliation statements:
• Outstanding deposits
• Cheques not yet presented for payment
• Stop/debit orders
• Direct transfers
• Bank charges
• Interest received or charged
• Correction of errors or omissions
• Cheques R/D or cancelled
• Post-dated cheques received and future dated EFT’s
Reconcile statements received form creditors with accounts in
creditor’s ledger of a business in order to prepare creditors’
reconciliation statements:
• Outstanding invoices or credit notes
• Outstanding payments
• Discounts not recorded
• Correction of errors or omissions
• Integration of issues of internal control
• Integration of ethical issues relating to the banking environment
, At the end of each month, the business will receive a statement of account from its
creditors. These statements will show all the transactions that took place between the
creditors and the business for a certain time period. The statement, which is an external
document, shows our transactions with the creditors from THEIR POINT OF VIEW. The
statement must be compared to the creditor’s account in the Creditor’s Ledger to ensure
that the details of all invoices and other transactions reflected on it, are correct.
Control over creditors
It is important that the business always maintains good control over their creditors. In
doing so, the business can ensure that:
The creditors clerk does his/her job efficiently in order to prevent errors from
occurring.
The procurement policy is being adhered, in that purchases are authorised.
The correct amount of items that were ordered from creditors are received and are
in a good condition.
Creditors are paid on time so that the business qualifies for the necessary discounts.
Full use is made of the credit terms (60-90 days) in order to maintain good cash flow.
There is division of duties amongst employees so that one person can check another
person’s work.
The balance in the Creditors Control account is reconciled to the total Creditors List to
ensure that records are accurately updated.
The statement received from individual creditors is reconciled with their accounts in
the Creditors Ledger.
Internal audits to are conducted in order to minimise the possibility of fraud or error.
The Creditors Control account and the Creditors List
A creditor is a liability because they are owed money by the business. When a purchase
is made from a creditor, the liability is credited to show that the business owes the
creditor more and when a payment is made, the liability is debited.
Creditors:
Suppliers of goods and
services on credit to the
business.
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