Month of Purchase



Record the purchase transaction

Debit Purchases account and credit Accounts Payable account for the invoice amount.

Post the transaction to the Purchases and Accounts Payable ledgers.Month of Return



Record the return transaction

Debit Accounts Payable account and credit Returns and Allowances account for the credit memo amount.

Post the transaction to the Accounts Payable and Returns and Allowances ledgers.Reconciliation

To reconcile the Accounts Payable account, follow these steps:1.

List the beginning balance of the Accounts Payable account for the month of return.2. Add the total of all purchases made during the month of return.3. Subtract the total of all returns and allowances processed during the month of return.4. The resulting balance should agree with the ending balance of the Accounts Payable account for the month of return.Example

Beginning balance of Accounts Payable: $10,000 Purchases made in the month of return: $5,000 Returns and allowances processed in the month of return: $2,000

Reconciliation

$10,000 (Beginning balance) + $5,000 (Purchases) - $2,000 (Returns and Allowances)

= $13,000 (Ending balance)Verification: Check the ending balance of the Accounts Payable account against the balance shown in the general ledger.* Review the supporting documentation (invoices, credit memos) to ensure that all transactions have been recorded accurately. Flag for review