The supplier says you owe ₹2,75,000. Your ledger says ₹2,45,000. Before releasing the next payment, someone needs to explain the ₹30,000 difference. Vendor reconciliation is the working paper that connects those two balances, identifies the records that need correcting and leaves a clear trail for the reviewer.
This guide follows one supplier at 31 October 2026. The example includes missing and duplicate invoices, a booking error, an unallocated payment and a credit note. It uses the same figures as the downloadable Excel workbook.
Start with balances for the same supplier and date
Obtain the supplier statement, the company’s detailed vendor ledger and the open-item listing. Confirm the legal entity, supplier code, currency and cutoff date. A statement for one hotel cannot be compared with a ledger combining several properties without first separating the transactions. Keep an unedited copy of each source before making adjustments.
Use a consistent sign convention. In this guide, a positive balance means the company owes the supplier. Increases to the payable are positive adjustments and decreases are negative. A supplier’s statement may use the opposite debit and credit presentation, so translate its signs before comparing amounts.
Match documents before investigating the closing balance
Compare invoice references, dates and amounts, then match payments to bank references and remittance advice. Check credit notes, debit notes and opening items separately. A payment covering three invoices needs an allocation, even when its total matches the bank debit. Similar invoice numbers are a reason to investigate, rather than proof of a duplicate.
Worked example with five reconciling items
| Item identified | Adjustment to company payable | Adjustment to supplier statement |
|---|---|---|
| Invoice INV-104 is on the statement but missing from the books | +₹40,000 | ₹0 |
| Invoice INV-088 was booked twice in the company ledger | −₹20,000 | ₹0 |
| Invoice INV-097 was overstated in the books | −₹5,000 | ₹0 |
| Payment UTR-061 is in the books and bank, but the supplier has not allocated it | ₹0 | −₹10,000 |
| Credit note CN-012 is already in the books but absent from the statement | ₹0 | −₹5,000 |
Company balance after supported adjustments = ₹2,45,000 + ₹40,000 − ₹20,000 − ₹5,000 = ₹2,60,000. Supplier balance after the working-paper adjustments = ₹2,75,000 − ₹10,000 − ₹5,000 = ₹2,60,000. The unexplained difference is zero.
The supplier adjustments are a bridge to the agreed position. Send the payment proof and credit-note reference to the supplier and request an updated statement or written confirmation. Keep disputed items visible until resolved. A balanced worksheet alone does not authorise a payment.
Which items need a journal entry?
The missing invoice, duplicate booking and overstatement need approved corrections in the company’s records. The unallocated payment and credit note already recorded correctly in the books generally require follow-up with the supplier. Posting those two items again would create another difference.
| Simplified correction | Debit | Credit |
|---|---|---|
| Record a supported missing expense invoice | Expense ₹40,000 | Vendor payable ₹40,000 |
| Reverse the duplicate expense invoice | Vendor payable ₹20,000 | Expense ₹20,000 |
| Correct the overstated expense | Vendor payable ₹5,000 | Expense ₹5,000 |
These entries assume the original items were expenses and omit tax splits. For inventory, fixed assets, recoverable tax or withholding, follow the original document and applicable treatment. If a goods receipt has already recorded the liability through GR/IR, check that clearing account before creating a separate expense accrual.
Download and use the Excel format
Download the Vendor Reconciliation Excel Format. The workbook contains a completed example and a blank working format with 25 adjustment rows. Yellow cells are inputs. Enter the two closing balances and record each difference once on the side requiring correction. The adjusted balances, unexplained difference and review message calculate automatically.
Keep invoice-level evidence with the workbook. Before signing off, confirm that corrections were posted, supplier-side differences were acknowledged, old items have owners and the final ledger agrees with the payable control account. Reconcile supplier advances separately where your ledger presents them outside trade payables.
- Accounts payable process
- Bank reconciliation
- GR/IR reconciliation at month-end
- IAS 2 inventory cost guidance
Prepared by the TaxNexus Editorial Team. Last reviewed 6 November 2026. All amounts and business records in the worked examples are illustrative. Apply your organisation’s accounting policies and review the applicable tax treatment before posting entries.
