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Ordan Received a statement from one its suppliers , Alta , showing a balance due of $3980.
The amount due according to the payablesle ledger account of Alta in Ordan’s records was only $230 .
Comparison of the statement and the ledger account revealed the following differences :1) A cheque sent by ordan for $270 has not been allowed for in Alta’s statement
2) Alta has not allowe for goods returned by Ordan $180
3) Ordan made a contra entry , reducing the amount due to Alta by $3200 , for balance due from Alta in ordan receivebles ledger , No such has been made in Alta’s Records.
calculation :
Balance per Alta $3980
Cheque not yet received ($270) (1)
Goods Returned ($180) (2)
contra entry (3200) (3)
Revised balance per Alta 330Balance per Ordan (230)
Remaining balance 100
Could you explain to me why cheque not yet received at point (1) we need to deducted as in payable account when we paid to supplier the balance amount will be reduced , however when we have not received yet ,we logically add back as to increase the balance amount.
When we do reconcilation between Altas (supplier ) and Ordan ( buyer record ) , which point of view we need to look at . I always confuse .
many thank in advance
The reconciliation is purely to make sure that we can explain why there appears to be a difference. It is not because the statement is ‘wrong’ necessarily, but because for whatever reason certain items have not yet appeared.
Alta thinks they are owed 3890 by Ordan. However the cheque that Ordan sent them has not yet been recorded by them. When they do record it they will have Ordan owing them less money.
Similarly, Alta has not yet recorded the goods returned or the contra entry. When they do record them then they will show Ordan as owing them less money.The fact that even after adjusting the statement for these, there remains a difference, means that either Alta or Ordan have made a mistake somewhere (but what the mistake is, is not relevant for the question).
Thank a lot John , that really help me a lot to improve basic accounting knowledge
Sorry i have some problems about languages
I dont get the question meaning : “Ordan Received a statement from one its suppliers , Alta , showing a balance due of $3980.” . Is it mean ordan owe Alta 3980 in bank statements?“The amount due according to the payablesle ledger account of Alta in Ordan’s records was only $230” . Is it mean Alta also owe Ordan 230 in payable ledger account of Alta?
Thanks in advance sir
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