A vendor reconciliation account is a balance sheet account found in the general ledger. This account is used to summarise the transactions found on the accounts payable sub-ledger and is also referred to as a control account.
The accounts payable sub-ledger is used by the accounts payable department to manage all vendor-related activity. This sub-ledger includes such details as customer name, number, payment terms, discounts and outstanding invoices. The summary activity of this ledger is reported on the general ledger using the reconciliation account.
The SAP accounting application requires each vendor master record to be assigned a vendor reconciliation account. When postings occur in the vendor account in the accounts payable sub-ledger, the vendor reconciliation account automatically updates the general ledger. This ensures the balance in the sub-ledger always equals the total found on the general ledger.
Using a vendor reconciliation account prevents the general ledger from being cluttered with transactions that are irrelevant to other users of the general ledger. This account serves to validate that the balance of the sub-ledger matches what is reported on the general ledger.
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