Aged reports vs nominal balances

It is a common bookkeeping check that the aged customers and aged suppliers reports match the nominal balances of both 711(Sales Ledger) and 812 (Purchase Ledger). If there is a difference between the aged report balance and the ledger balances, there are some checks that need to be done to highlight what the issue may be. 

Understand how the reports function

A -The aged report runs based on the transaction dates selected on invoices, payments, Receipts & Credit Notes.

B -The reports for nominal balances are based on the financial period of the transactions.

This means you can post a transaction to a previous locked period which will show in the aged report at that date but not the nominal balance as that period was locked so it falls into the next available financial period (continued below)

When facing discrepancies in aged debtors and nominal balances, ensure that the 'current aging' option is selected in reports. This option relates to outstanding amounts that are not yet overdue.

1.  Identify when this difference originally occurred. Check to see if the difference is only for the month the reports are currently being run for. Run the aged report & trial balance for the full year to see if the same difference occurs. If it does not, proceed to the checks below. If the same difference is there for the year, you must check to see if the same difference was there last year also. Repeat this until you find what year the balance difference started. Then proceed to the checks below for that year.

1. Any journals posted to the nominal will not be reflected in the aged reports, as the aged report is solely based on the outstanding amounts on the invoices. To check for journals, go to reports>journal listing report, run for the nominal code in question (711/812). If there are any journals here, then this will be a factor in the difference.

1. Postings to a locked period are the main cause and are usually an occurrence around the year-end when the user locks the current year manually or by running a year-end procedure, then posts more transactions to that locked year. Those transactions will retain the dates in the locked year, but the period of these transactions will be in the next year, meaning the aged reports will include them when running them for the locked year, but the trial balance will not, as they are not in that period. Run the general ledger account details report for the Future year and include the period column. If there is a transaction in the future year dated in the previous year, that’s generally where the difference is. Only do this after step 1. So, if the difference started in the comparative year, you would run this for the current year. If the difference started in the current year, you run it for the future year. It’s mainly transactions entered in the next year period but dated in the previous one.

1. Opening balances. If the incorrect opening balance journal is entered on the accounts, it will cause an issue. Generally, the opening balance for 711 and 812 is accounted for twice. Once by entering the opening balance journal, and again by posting all of the opening balance invoices. After both are done, you should post a reversal journal for the opening journal amount from the sales/purchase ledger against 999. If this is done, then the opening journal will not impact this, as the amount is in and out of the ledger.

1. Other Notes it can happen that the difference can be spread across multiple years. Generally, if the issue goes back more than a year, you may have to post a journal adjustment to fix the balances. You should still continue all your checks to see all of the postings causing the difference, so the adjustment can be explained.

Allocating Invoices and Credit Notes