Accounts Receivable / Payable and Bank Reconciliation

Accounts Receivable represents the outstanding payments a business is entitled to receive from its customers for products or services that have been delivered but not yet paid for. It plays a vital role in maintaining healthy cash flow and is typically monitored through an Accounts Receivable ledger. Efficient management of AR ensures timely collections and reduces the risk of bad debts.

Accounts Payable refers to the amount a business owes to its vendors or suppliers for goods or services received on credit. Managing AP effectively is crucial to maintaining good supplier relationships and ensuring that obligations are settled on time. These transactions are tracked using an Accounts Payable ledger and directly impact the company’s cash outflows.

Bank reconciliation is the process of comparing a company’s internal financial records with the entries in its bank statement to ensure accuracy and consistency. This practice helps identify discrepancies such as unrecorded transactions, bank charges, or errors, and is essential for maintaining accurate financial records and detecting potential issues like fraud or accounting mistakes.