---
title: "Vendor statements and the payables tie-out"
description: "The drill vendor's statement against Northwind's books, matched by invoice number: one unrecorded $1,850 freight bill explains the whole difference."
canonical: "https://lopifi.com/learn/vendor-statements-and-ap-tie-out"
---

# Vendor statements and the payables tie-out

> The drill vendor's statement against Northwind's books, matched by invoice number: one unrecorded $1,850 freight bill explains the whole difference.

Source: https://lopifi.com/learn/vendor-statements-and-ap-tie-out
Part of: Lopifi — Planned: US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

---

**How do you reconcile a vendor statement to your payables, and tie AP to the ledger?** The drill vendor's statement against Northwind's books, matched by invoice number: one unrecorded $1,850 freight bill explains the whole difference.

A vendor statement is the vendor's list of what it thinks Northwind owes. The AP aging is Northwind's. They should agree, and when they do not, the difference is where lost invoices, payments the vendor has not posted, disputed amounts and duplicates all live. [Reconciling the two](https://lopifi.com/md/glossary/vendor-statement-reconciliation) for the vendors that matter is the cheapest control in accounts payable: it uses the vendor as an independent check on Northwind's books.

At September 30 the drill vendor's statement lists two open invoices. Northwind's books list one. The match is by the vendor's own invoice number, never by amount: matching on amount lets a missing invoice and an extra one cancel out.

| Invoice | Vendor's statement | Northwind's books | Result |
| --- | --- | --- | --- |
| DV-3301 | 6,000 | 6,000 | Agrees |
| DV-3340 | 1,850 |  | Not in the books |

The drill vendor's statement against Northwind's open items. Statement $7,850, books $6,000, difference $1,850.

One line explains the whole $1,850: invoice DV-3340, dated September 29 for freight on a delivery that day, which nobody had entered. Whether it is booked as a bill or accrued depends on whether September is still open, which is the subject of the [search for unrecorded liabilities](https://lopifi.com/md/learn/vendor-statements-and-ap-tie-out/unrecorded-liabilities-search) that follows. The point here is the method: every dollar of the difference is a named line.

**Scenario — A statement that is higher than the aging.** The drill vendor's statement arrives showing $7,850 due. Northwind's aging says $6,000. Paying the statement's total would be paying an invoice nobody approved, and disputing the whole thing would be unfair to a vendor that may be right. The clerk ticks the statement against the aging by invoice number and finds one line left over: $1,850 that Northwind never entered.

1. **Choose the vendors.** Start with the vendors with the largest balances and the ones in dispute. A statement from every vendor every month is not worth the effort for a vendor owed a few hundred dollars.
2. **Get the statement at the same date.** Ask for a statement as of the same date as the aging, month end. A statement from a different day creates differences that are only timing.
3. **Match by invoice number.** Tick each invoice on the statement against the aging by the vendor's invoice number. Credits are negative amounts.
4. **Classify what is left.** Whatever is left over is one of four things, below. Name each one.
5. **Fix your side, tell theirs.** Record what is Northwind's to record, send the vendor what is the vendor's to post, and file the reconciliation with the month's close.

Reconciling a vendor statement.

| Result | Usual cause | What to do |
| --- | --- | --- |
| Agrees | Both sides recorded the same invoice | Nothing |
| Amount differs | A keying error, a price change or a credit applied on one side | Get the invoice and see who is right |
| Not in the books | An invoice lost in transit, or entered in the wrong period | Get the invoice, then record it or dispute it |
| Not on the statement | A credit memo or payment the vendor has not posted yet | Send proof: the credit memo number or the payment confirmation |

What a reconciling item usually means.

Correcting an amount is a real entry. If the packaging supplier's invoice PK-2207 was recorded at $1,205 and the invoice says $1,250, the bill was under-recorded by $45. Digits swapped: a difference divisible by nine is the signature of a transposition.

**Exercise — Reconcile the packaging supplier's statement.** The packaging supplier's statement beside Northwind's open items for the same supplier. Credits are negative. For each line, say what it needs. The check below also proves the lines explain the whole difference between the two totals. Type it in the workbook at https://lopifi.com/playground.

## From one vendor to the whole ledger

A statement reconciliation proves one vendor. The [Tie-out](https://lopifi.com/md/glossary/tie-out) proves all of them at once: the [AP aging](https://lopifi.com/md/glossary/aging), which is the [Subledger](https://lopifi.com/md/glossary/subledger), must equal account 2000, the [control account](https://lopifi.com/md/glossary/control-account). At September 30 Northwind's aging is $6,000 and account 2000 is $6,000. They tie. The tie-out, and what to do when it fails, is part of the [month-end close checklist](https://lopifi.com/md/learn/month-end-ap-close-checklist).

> **Tip.** **Pay invoices, not statements.** A statement is a list, not a bill. It does not carry the approval and match evidence an invoice does, so use it to find invoices and then bring them through the normal process. **Reconcile by invoice number, never by amount,** so a missing invoice and an extra one cannot hide each other. **Have statements sent to the AP mailbox,** not to whoever happens to know the vendor.

> **Mistake.** Plugging the difference to miscellaneous expense so the reconciliation shows zero. A difference with no name is a finding, and a plug turns it into a hidden one. Leave it open, labeled, with an owner and a date.

> **The vendor keeps its own books on what Northwind owes. Comparing the two by invoice number is the only check on payables that does not come from inside the company.**

## Pages in this lesson

- [The search for unrecorded liabilities](https://lopifi.com/md/learn/vendor-statements-and-ap-tie-out/unrecorded-liabilities-search) — 8 min. How do you find bills that belong in last month and accrue them at month end?

## Where this lesson's rules come from

- [SEC Release 33-8238 (June 2003) — Sarbanes-Oxley §404](https://www.sec.gov/rule-release/33-8238) — Management's report on internal control over financial reporting (sec)
- [ASC 405](https://asc.fasb.org/405/tableOfContent) — Liabilities (codification)
- [Wikipedia, “Accounts payable”](https://en.wikipedia.org/wiki/Accounts_payable) — Accounts payable (reference)

## Read further

- https://lopifi.com/md/startups/accounts-payable-process-for-startups
- https://lopifi.com/md/startups/bank-reconciliation-step-by-step
- https://lopifi.com/md/accounting/reconciliation
- https://lopifi.com/md/accounting/accounts-payable
- https://lopifi.com/md/docs/domain/procure-to-pay
- https://lopifi.com/md/docs/domain/periods-and-close

- **Track:** [Accounts payable](https://lopifi.com/md/learn/ap)
- **Lesson:** Lesson 11 of 21 — 10 min
- **Terms taught:** [Tie-out](https://lopifi.com/md/glossary/tie-out), [Subledger](https://lopifi.com/md/glossary/subledger), [Control account](https://lopifi.com/md/glossary/control-account), [Reconciliation](https://lopifi.com/md/glossary/reconciliation), [Aging](https://lopifi.com/md/glossary/aging), [Evidence](https://lopifi.com/md/glossary/evidence), [Vendor statement reconciliation](https://lopifi.com/md/glossary/vendor-statement-reconciliation), [AP reconciliation](https://lopifi.com/md/glossary/ap-reconciliation)
- **Previous:** [Vendor credits, short pays and duplicate payments, AP · Lesson 10](https://lopifi.com/md/learn/vendor-credits-and-duplicate-payments)
- **Next:** [The search for unrecorded liabilities](https://lopifi.com/md/learn/vendor-statements-and-ap-tie-out/unrecorded-liabilities-search)
- **The course:** https://lopifi.com/md/learn