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Accounts receivable in India carries a compliance dimension that is not present in most other markets. A debtor’s balance is not just an amount owed — it is also a record that must reconcile to Form 26AS (for TDS deducted by the customer), to GSTR-1 (for GST declared on the supply), and to the customer’s GSTR-2B (for ITC they have claimed). All three must agree.
Accounts Receivable Ledger Reconciliation
AR reconciliation has two components: the internal reconciliation (your AR ledger vs your bank receipts) and the external reconciliation (your AR ledger vs the customer’s records).
Internal AR Reconciliation
Internal reconciliation verifies that every payment received from a customer has been correctly allocated to the right invoice in the right amount.
Common internal AR errors in India:
- Payment received net of TDS allocated to the gross invoice — leaving a balance equal to the TDS amount
- Partial payment allocated to the oldest invoice in the ledger rather than the invoice the customer intended
- Cash payment recorded in a different period than the bank receipt (timing difference)
- Advance from customer posted to AR rather than customer advance liability
The TDS Dimension of AR Reconciliation
Every professional services or contractor payment received from a customer carries a TDS deduction. Reconciling AR in India requires matching:
| Your record | Customer’s record | Government record |
|---|---|---|
| Invoice amount (gross) | Invoice received (gross) | GST outward supply (gross) |
| Payment received (net of TDS) | Payment made (net of TDS) | — |
| TDS receivable | — | Form 26AS TDS credit |
The TDS receivable must be matched to Form 26AS separately — it is not resolved by the payment receipt alone.
Accounts Payable Matching Process
AP reconciliation confirms that what you owe to suppliers matches what they say you owe them.
The standard AP reconciliation process:
- Download the AP ledger — all open items by supplier, invoice number, and due date
- Send balance confirmation requests to suppliers above the materiality threshold (₹5 lakh typically)
- Receive supplier statements and reconcile to the AP ledger — invoice by invoice
- Classify differences: timing (invoice received, not yet posted), disputed (invoice in dispute), genuine error
- Resolve timing differences within 5 working days; escalate disputes to commercial team
The GST dimension of AP reconciliation: every supplier invoice above ₹50,000 should appear in GSTR-2B. If it does not, the buyer cannot claim ITC — and the AP balance should be flagged until the supplier files.
Age-Wise Outstanding Analysis
Age-wise analysis classifies AR by days since invoice date:
| Age bucket | Standard treatment | India-specific action |
|---|---|---|
| 0–30 days | Normal | No action |
| 31–60 days | Send payment reminder | Verify TDS deduction applied correctly |
| 61–90 days | Formal follow-up | Verify GSTR-2B credit appeared |
| 91–180 days | Legal notice or escalation | ITC reversal approaching (180-day rule) |
| 180+ days | Provision for doubtful debt | ITC reversal mandatory under Section 16(2)(b) |
The 180-day rule under Section 16(2)(b) of the CGST Act is one of the most operationally important GST compliance requirements for AP teams: if the buyer has not paid the supplier within 180 days of the invoice date, the buyer must reverse ITC claimed on that invoice in the next GSTR-3B filing.
Disputed Invoice Resolution
Disputed invoices are a common source of AR reconciliation differences. Best practice:
- Record the dispute in the invoice header — “disputed: reason + date raised”
- Age disputed invoices separately from clean AR — do not provision against clean AR
- If the dispute results in partial payment: match the payment to the agreed portion, credit note the rest
- If a credit note is issued: reconcile to the original invoice, ensure the credit note appears in GSTR-1, and verify the customer reverses ITC in their GSTR-3B
Confirmation of Balance from Vendors
Vendor balance confirmation is a dual-control process: you send a statement of what you believe is owed; they confirm or dispute it. The differences identified in this process are often more significant than internal reconciliation finds — because the supplier and buyer have different invoice records, different accounting dates, or different GST treatment of the same transaction.
Reconciliation software India that manages intercompany and counterparty matching can automate the balance confirmation workflow — sending confirmation requests, recording responses, and flagging unconfirmed balances above threshold for auditor follow-up.
Bank reconciliation software that tracks payment receipts by UTR and links them to AR invoices prevents the most common internal AR error: payment allocated to the wrong invoice.
The Institute of Chartered Accountants of India publishes SA 505 (External Confirmations), the auditing standard that governs debtor confirmation procedures in statutory audits.