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Reconciliation of Debtors and Creditors

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  • Definition: Reconciliation of Debtors and Creditors
  • Steps for Reconciliation
Maharashtra State Board: Class 11

Definition : Reconciliation of Debtors and Creditors

Reconciliation of debtors and creditors means comparing your records of what customers owe you (debtors) and what you owe suppliers (creditors) with their records to make sure both sides agree and any differences are found and fixed.

Maharashtra State Board: Class 11

Steps for Reconciliation

  1. Collect Records: Get the list/statement from the debtor or creditor showing their transactions with you.

  2. Prepare Your Ledger: Make a list of all transactions recorded in your own books for that debtor or creditor.

  3. Compare Entries: Line by line, compare both lists to identify matches and mismatches.

  4. Identify Differences: Mark any unmatched transactions or differences in amounts.

  5. Group Differences: Categorize the issues (such as timing, errors, and omissions).

  6. Prepare Reconciliation Statement: List both balances and make adjustments to explain the differences.

  7. Arrive at Correct Balance: The statement should explain and justify the differences, helping both parties agree on the final amount.

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