Accounting and Bookkeeping
Account Reconciliations: Bank, Customer, Supplier and Intercompany
Comparing the records for bank accounts, customer and supplier current accounts, intercompany balances, cash and year-end foreign exchange valuation with counterparty data.
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Overview
Account reconciliation means comparing the balances in the company’s records with bank statements, customer and supplier records, the records of group companies and physical counts. Differences are identified together with their causes, and the entries that need correcting are made before the period is closed.
Records that must be kept by law and records of transactions with third parties are based on supporting documents, unless the law provides otherwise. (Tax Procedure Law No. 213, Art. 227) At year-end, assets, receivables and payables are counted, measured, weighed and valued. (Tax Procedure Law No. 213, Art. 186) Reconciliation is used to check whether these records are consistent with the documents and with counterparty data.
KEYBIZ CPAs & Advisors prepares monthly and year-end reconciliations, follows up differences with counterparties and posts the necessary correcting entries to the statutory books. For the bookkeeping process, see our Statutory Bookkeeping page.
Types of Reconciliation
| Sources Compared | Common Differences | |
|---|---|---|
| Bank Reconciliation | Bank account statements and the bank accounts in the books | Unrecorded charges and interest, transfers in transit, uncollected cheques, entries posted to the wrong account |
| Customer Current Accounts | The company’s receivable records and the customer’s payable records | Unrecorded invoices, returns and discounts, partial collections, exchange difference invoices |
| Supplier Current Accounts | The company’s payable records and the supplier’s receivable records | Late-arriving invoices, advance payments, duplicate entries, documents recorded in a different period |
| Intercompany | Group companies’ records of receivables, payables, income and expenses with each other | Use of different exchange rates, different recording dates, service and management fee invoices not recorded by the counterparty |
| Cash | Cash account balance and physical count | Expenses whose documents have not been recorded, advances, exchange differences in foreign currency cash |
| Year-End Valuation | Accounts denominated in foreign currency and the exchange rate on the valuation date | Foreign currency balances not yet valued, different exchange rates applied by the counterparty |
Form Ba-Bs and Electronic Documents
Form Ba and Form Bs, in which taxpayers keeping books on the balance-sheet basis reported their purchases and sales of goods and services above a certain amount, are no longer filed from the notifications for the September 2024 period onwards. Tax Procedure Law General Communiqué Serial No. 565 repealed Communiqués Serial No. 362, 381 and 396 starting from this period; the provisions of these communiqués continue to apply to earlier periods. The Communiqué cites the wider use of electronic documents and information sharing between public administrations as its reasons. (VUK General Communiqué Serial No. 565)
The abolition of Form Ba-Bs does not remove the need to reconcile with counterparties. Customer and supplier balances are compared periodically, also using e-invoice (e-Fatura) and e-archive invoice (e-Arşiv) records, and differences are resolved document by document.
Reconciliation Process
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Setting the Scope and Timetable
We determine which accounts are reconciled and how often. Bank and cash accounts are usually reconciled monthly, current accounts and intercompany balances monthly or quarterly, and all accounts at year-end.
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Collecting the Data
The following information and documents are collected for reconciliation:
- Bank account statements and bank balance confirmations
- Customer and supplier account statements
- Intercompany balance lists of group companies
- E-invoice and e-archive invoice records
- Cash count report
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Sending Confirmation Letters
Customers and suppliers are sent a confirmation letter showing the balance in the company’s records as of a specific date. The counterparty is asked to confirm the balance or to state the balance in its own records and the reasons for the difference.
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Intercompany Reconciliation
Group companies compare their balances with each other on the same date and at the same exchange rate. Invoices not recorded by the counterparty and exchange differences are identified; the amounts to be eliminated on consolidation are finalised based on this work. For details, see our Multinational Companies page.
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Cash Count and Year-End Valuation
Cash on hand is physically counted and compared with the cash account. (Tax Procedure Law No. 213, Art. 186) Foreign currencies and receivables and payables denominated in foreign currency are valued at the stock exchange rate; if there is no stock exchange rate, the rate to be used is set by the Ministry. (Tax Procedure Law No. 213, Art. 280) Exchange differences arising from the valuation are recorded in the year-end entries.
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Resolving Differences and Reporting
For each difference, the cause, the responsible party and the correcting entry are identified. Reconciliation working papers and counterparty confirmations are kept in the period file; differences that remain open are listed for follow-up in the next period.
Frequently Asked Questions
Is Form Ba-Bs Still Filed?
No. Form Ba and Form Bs are no longer filed from the notifications for the September 2024 period onwards. The provisions of the previous communiqués continue to apply to earlier periods. (VUK General Communiqué Serial No. 565)
What Is a Confirmation Letter Used For?
A confirmation letter is a method used to confirm the balance on a specific date with the counterparty. Records must be based on supporting documents, and receivables and payables must be determined at year-end. (VUK Art. 186, 227) Counterparty confirmation helps support this determination with documents.
How Often Should Bank Reconciliation Be Done?
Because bank accounts have a high volume of transactions, reconciliation is usually done monthly. This way, unrecorded charges, interest and transfers are recorded in the same period.
What If the Counterparty Reports a Different Balance?
The difference is examined document by document: unrecorded invoices, returns, payments and documents recorded in different periods are compared one by one. Which party’s record is corrected is determined based on the documents, and a correcting entry is made.
Why Do Exchange Differences Arise in Foreign Currency Current Accounts?
Receivables and payables denominated in foreign currency are valued at the stock exchange rate at year-end. (VUK Art. 280) If one of the parties carries out the valuation at a different rate or on a different date, the Turkish lira balances do not match. For this reason, foreign currency accounts are reconciled first on the basis of the foreign currency amount.
Why Is Intercompany Reconciliation Important?
Group companies’ balances with each other are eliminated on consolidation. If the balances do not match, elimination cannot be made and unexplained differences arise in the group report. In addition, transactions with related parties are also monitored for transfer pricing purposes.
Legal Basis
- Tax Procedure Law No. 213 (213 sayılı Vergi Usul Kanunu) Art. 186, 227, 280
- Tax Procedure Law General Communiqué, Serial No. 565 (Vergi Usul Kanunu Genel Tebliği, Sıra No: 565) Official Gazette 25.09.2024, No. 32673
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