Accounts payable represents money owed by a company to vendors. In accounting terms, the money owed represents liabilities. Many companies have multiple accounts payable sub-accounts. While the payment of liabilities owed often works quite well, companies may have a residual balance left in their general ledger. Residual balances are often the result of improper payments or incorrect posting by accountants. Companies can usually write these amounts off after conducting a basic due diligence process for each payables account.
Contact the vendor linked to the accounts payable on the general ledger. Request a full statement of account for the previous 12 months.
Reconcile the internal payables account to the vendor statement. Mark off all invoices paid in full by the company.
Mark all differences with a highlighter between vendor invoices and payments made by the company.
Review the highlighted differences to determine if payments may be necessary to the vendor. Mark all amounts with a short comment for writing off unidentified differences.
Write up a journal entry to clear the account balances. Debit the accounts payable account and credit other income. In some cases, companies can credit the account debited from the original entry.
Always clarify with a licensed accountant how you should write off accounts payable balances. Different laws and accounting standards may apply to your business situation.
- "Intermediate Accounting"; David Spiceland, et al.; 2007