Question

What is the purpose of a reconciliation account, such as a AP reconciliation account?

Answer 1

Reconciliation Account is made to make sure that balances of two financial records (involved in reconciliation) are in agreement with each other, another purpose of this account is to check that actual money spent is equal to the money recorded in accounts as expenses. In reconciliation account if balance matches at the end of a particular accounting period then it is considered that the account is properly reconciled.

Reconciliation of Accounts payable ensures that whether balances of Accounts Payable recorded in the Balance sheet is correct or not. It is done by comparing accounts maintained in the system against the monthly statement received from party.

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