Reconciling Accounts Receivable to the General Ledger
The purpose of this article to to provide tips on reconciling Accounts Receivable to General Ledger.
Reconciling Accounts Receivable to the General Ledger
Reconciling the balances in the Accounts Receivable module with AR accounts in General Ledger is an important step and should be done as part of the month-end closing process. If a monthly reconciliation is done, the proper documentation will be available if an audit is performed, and any differences that exist between the two modules can be caught and corrected before the period is closed.
What Accounts Should Be Reconciled?
All of the information entered in Accounts Receivable updates a General Ledger account. The most important account to reconcile is the Accounts Receivable account. Other accounts that you may want to reconcile between the two modules would be the AR Holding account (if you are using Cash Manager), income accounts, the cash account, discounts, finance charges, etc.
Reconciling the AR account in GL means that the total of Accounts Receivable from the AR module equals the balance of the AR account in General Ledger.
What Reports Should Be Examined for Reconciliation?
Customer Trial Balance (08.620) – Open Documents Only format or the Aged AR (08.610) – Summary Customer Balances format.
General Ledger Trial Balance (01.610) either format – Run this just for the account being balanced. This is done by entering a Select statement for your Accounts Receivable account as follows: Field: account.acct, Operator: Equal, Value: (the AR account).
The account total on the GL Trial Balance report should balance with the total on the Accounts Receivable report. If the totals from these two reports balance, no further reconciliation is needed.
NOTE: If you have multiple Accounts Receivable accounts and or multiple subaccounts with one Accounts Receivable account, you will need to do one of two things:
1. Print the AR report with a select statement to include only one of the AR accounts and then use the same select statement in the GL Trial Balance and compare each AR account one by one.
2. Add all of the AR accounts in the GL Trial Balance and compare it to the total from the AR report.
Customer Period Trial Balance (08.621) and Period Sensitive Aged AR (08.611) - To reconcile past periods, Dynamics SL provides these reports that show the document balances as of that period and can be used to reconcile against General Ledger for that prior period.
Reconciling Differences Between the AR report and the GL Trial Balance
If a difference is found by comparing the totals of either the Aged AR or the Customer Trial Balance with the GL Trial Balance, there are many detailed reports available in Dynamics SL to help find the differences.
Detail General Ledger (01.620) – Print this report for the Accounts Receivable accounts. This will show all the entries posted to the accounts for the period.
To verify the module where an entry to AR originated, use the Jrnl Type field. It will have the module designated as AR (Accounts Receivable), GJ (General Ledger) or AP (Accounts Payable). It is possible that when entering a GL batch, the Journal Type could be changed to AR in which case using the Jrnl Type alone to find discrepancies may not be enough. If that occurs, use Tran Type in addition to Jrnl Type to identify the necessary transactions. The possible Tran Types are GL (General Ledger), CE (Consolidation), LS (Allocation Source) and LD (Allocation Destination). The Tran Type is equivalent to the document type of the original document.
If there is a Jrnl Type other than AR, this would indicate that an entry was made to the Accounts Receivable account through a module other than Accounts Receivable which would create a difference between General Ledger and Accounts Receivable. A simple way to find the original entry for the transaction is to do the following:
1. Note the batch number of the transaction in the Bat Nbr field and the entry in the Jrnl Type field on the Detail General Ledger report.
2. Open the Edit Report for the module noted in the Jrnl Type field (i.e. if the Jrnl Type field is GJ, open the GL Edit (01.810) report). Enter a select statement to have the report include only the batch number noted above. Research the transaction in question on the Edit Report and decide what adjustments are needed to balance the accounts between the General Ledger accounts and the Accounts Receivable.
Entries posted to prior periods will not print on the current Detail General Ledger report. To determine if entries have been posted to prior periods, compare the beginning balance of the current month Detail General Ledger report with the ending balance of the prior month’s report for Accounts Receivable accounts and subaccounts. If the beginning balance of the current month and the ending balance of the prior month are not the same, it is an indication that a transaction has been posted to the prior period. Print a Detail General Ledger for the prior period and research the transactions that were posted to that period. Transactions posted in a different period will be marked with an asterisk (*) and the explanation ‘Indicates that the period entered is different from the period post’ will be printed at the bottom of the page making it easy to glance at a page to see which transactions were posted in a different period.
GL Transaction (01.680) – This report is also used when trying to reconcile differences between General Ledger and Accounts Receivable. Generate this report with an Unposted format. All transactions entered through subsidiary modules such as Accounts Receivable as well as those entered through the General Ledger are listed on this report. It will ensure there are no unposted transactions that may affect the customer or General Ledger balances.
Account Distribution (08.630) - To ensure that the Accounts Receivable accounts were properly debited for invoices and debit memos and credited for payments and credit memos, a review of this report should be done. The balance on this report should equal the balance of the Accounts Receivable accounts in the Detail General Ledger report. A review of the Transaction Type (TnTp) field will help identify transactions. Transaction types in the Accounts Receivable module are IN (invoice), PA (payment), CM (credit memo), DM (debit memo) and FI (finance charge). The batch number of each transaction is also listed on this report. If a questionable transaction is found, note the batch number in the Batch field and review the batch by running the AR Edit (08.810) report by batch number.
AR Transactions (08.640) – This report is very helpful if questionable transactions appear on any of the above reports. This report lists each transaction entered for the current period in Invoice and Memo (08.010), Payment Applications (08.030) and Payment Entry (08.050). It shows each Accounts Receivable account and offsetting expense account to which the transactions are posted. To sort the report by transaction type, select ARTRAN.TranType in the Sort/Select field and in the value field select the TnTp type of the transaction in question.
Accounts Receivable Integrity Check (08.990) - If after reviewing the above reports the problem is not resolved, this is the next option to consider. The Integrity Check verifies that the data in the Accounts Receivable module is complete and accurate.
The options which are used to only verify data and not change data in the Accounts Receivable module are:
Verify Posted AR Batches - Select to review all released Accounts Receivable batches to ensure that they were transferred correctly to the General Ledger (i.e., they are complete and accurate in the General Ledger). The process looks at each batch and ensures that there are documents for the batch and that the document amounts accumulated to the batch Control Total. If there are differences, an event log entry will be created.
Verify Customers Balances - Select to review all customer records to verify that each customer's open document balance equals the customer's associated current and future balance amount(s). If there are differences, an event log entry will be created.
Verify Payment Applications - Select to review the application process for all payments and credit memos to ensure that both adjusting and adjusted document records were updated (correctly applied to the database). If there are differences, an event log entry will be created.
Verify Periods of Closing
You should always run the verification options first before running the options to correct or rebuild the data. The correct and rebuild options in Accounts Receivable Integrity Check need to be run with caution because these options will change the data in the related records. The rebuild processes should not be run without approval from an accounting supervisor. A backup of the database should always be completed prior to running any one of these processes. The options are:
Correct Customer Balances to Total Doc Balance – Select to review all customer records and update (re-compute) the records as necessary to agree with their supporting open document balances. Before you run this function, you should ensure that all documents in the database are complete and correct. Run Verify Posted AR Batches, Verify Customer Balances, and Verify Payment Applications before you run this function. This option is available only if Verify Customer Balances has been selected.
Rebuild AR History from Documents – Select to update the customer history records by summarizing the accounts receivable documents for each customer by period. Run Verify Posted AR Batches, Verify Customer Balances, and Verify Payment Applications before you run this function.
Correct Periods of Closing
If errors have been found and corrected, the GL Trial Balance and the AR Customer Trial Balance or the Aged AR report should be reprinted and reviewed to verify that the balances agree.
Once the monthly reconciliation is done and it has been verified that Accounts Receivable and the General Ledger agree, closing for the month can be performed.
This article was TechKnowledge Document ID: 136078
Article ID: 869013 - Last Review: 07/26/2012 15:54:00 - Revision: 3.2
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