Reconciling

 

NOMINAL RECONCILIATION

Go first to the Nominal Ledger > Postings > Reconcile Accounts program. Select the Cash in Hand nominal from the list and review the list of transactions. Then reconcile (or ‘set’) the invoice payments against the journal to the Bank Account.  Do this by selecting the transaction and clicking on the Set button and answer Yes to the ‘Reconcile transaction’ question. This will then leave the un-reconciled transactions (or outstanding)  waiting for the banking to be done.  Doing this regularly will ensure that the Cash in Hand un-reconciled entries will be kept to a minimum – it should of course reflect the cash held in the respective departments.
 
When the Bank Statement arrives go to the Nominal Reconciliation again and mark (set) the transactions that are on the statement. If you have transferred or journalled several separate payments that went onto one paying in slip, then you may need to add together the entries to match the Statement entry. Once you have agreed them, the remaining or un-reconciled entries will be the outstanding for your manual reconciliation.
 
If you run a cash book where you enter your daily banking and list all your cheques, you will reconcile the Bank Statement to that first and then to the Nominal Ledger.  
 
The Bank reconciliation is one of the key controls that your accountants will need to carry out your audit. If you keep this up to date, and have a Sales Ledger and Purchase Ledger Balance that agree to the Debtors and Creditors Control totals on your nominal ledger you have the basis of balanced accounts that will form your annual accounts.  It also means you can have some confidence in the Profit and Loss account too !

 

INTERNAL & EXTERNAL RECONCILIATION

When you post an invoice to a suppliers account it credits Creditors Control. This account maps the debits and credits and keeps a running total - so it 'controls' that accounting function. Some similar purchases can be very different when made by different departments. Take a CD player.  • It could be bought by Parts to go into stock - you debit Stock and credit Creditors Control (via purchase ledger). • The same CD could be purchased by Service as fitted to a customers car - a sub-contract purchase sold out as a sub contract sale. In this case you debit Sub Contract Purchases and credit Creditors Control. • And then there is the Car Sales dept. Most accounting problems occur because of salesmen ! So when they buy a CD player from the same supplier as the above and fit it themselves, it needs to be posted to the vehicle to keep the profitability correct. All the nominal codes are set up for car sales in the Vehicle Groups menu. So when you post to a vehicle you are debiting the cost centre in this case Dealer Fitted Accessories.   But in this case you are not in Purchase Ledger so you cannot credit Creditors Control.  Instead you elect during posting to say if this is an Internal or External purchase.  In so doing you credit the Internal or External Control Account.  The posting is complete and the invoice now goes to the Accounts Dept for posting to the appropriate suppliers account.
Bill’s Training Tips                                                      
 
But hang on a minute - what nominal code do you use?  If you post it to Dealer Fitted Accessories you are posting it a second time. You have to use a nominal code as this is how the accounts system works - so you post to the External Control Account. This time you debit External Control.  If this was the only posting you would have a debit from Car Sales and a credit from Accounts thus matching the posting.  This posting is now complete and therefore "Controlled". By regularly looking at the External Control account and matching the postings through Nominal Account Reconciliation you can make sure that all purchases through the Sales Dept are properly controlled.  When you go into the program you select the account and initially view All transactions. Looking carefully you can agree the costs posted by car sales to the costs posted via purchase ledger and match them. To do this you highlight the entry and click set – then answer Yes to the “Reconcile Transaction” question. Once you have agreed all the entries that you can, click on the Unreconciled radio button and then you will see the ones that are left.  There will be two types of unreconciled  entries: • For those with a debit and no credit, this means the invoice has been lost or posted to the wrong nominal account.   • A credit and no debit means Sales have not posted the cost to the vehicle. You keep them in check and you have accurate accounts.   It is much the same with Internals.  Service or Parts post to the INTER sales ledger account. As soon as the invoice hits the account an automatic posting takes place to credit the Debtors Control account and debit the Internal Control Account. When you go through the Accept Workshop Costs routine you agree the invoices from Service and post then to the vehicle. In so doing you are debiting the cost centres as set up in Vehicle Groups and crediting the Internal Control account.This posting is now complete and therefore "Controlled".  By regularly looking at the Internal Control account and matching the postings through Account Reconciliation you can make sure that all purchases through the Sales Dept and properly controlled. Once again there are two types of unreconciled entries: • A debit and no credit means the invoice has not gone through the Accept Workshop Costs routine and therefore is probably stuck in the CASHR or some other Sales Ledger account.   • A credit and no debit means Sales have not posted the cost to the vehicle.
 
The key to an easy annual audit from your accountants is to reconcile these accounts:  Cash-in-Hand  Bank Account  Internal Control  External Control  Debtors

These 2 only need checking against the aged listings any difference Creditors needs investigating but they don’t usually occur.