Reconciling accounts receivable means verifying that the total in the AR control account matches the sum of individual customer balances. It also involves reviewing aged receivables to identify collection problems.
Steps:
- Pull the AR subsidiary ledger — the detailed list of every customer who owes money, with amounts and dates.
- Sum the individual balances. This total should match the AR control account in the general ledger.
- If they don’t match, investigate: look for payments recorded in one place but not the other, invoices posted to the wrong customer, or journal entries that hit the control account directly without updating the subsidiary ledger.
- Prepare an aging schedule. Group receivables by how long they’ve been outstanding:
- Current (0-30 days)
- 31-60 days
- 61-90 days
- Over 90 days
- Review the aging. Receivables over 60 days require follow-up. Receivables over 90 days may need to be written down or written off as bad debt.
Why aging matters: A business might show 40,000 of that is over 90 days old, it’s unlikely to be collected. The aging schedule reveals the quality of receivables, not just the quantity.