Many businesses have to deal with the tedious and highly technical task of reconciling accounts, as it is one of the key steps in the close process. It is a process aimed at streamlining the general ledger balances as they flow into the financial statements. Here’s a look at what account reconciliation is all about.
It is an accounting process where you compare your company’s general ledger entries with an independent statement to ascertain that the figures agree.
You would conduct accounting reconciliation to ensure your records are accurate, consistent, and complete. Account reconciliation also comes in handy in explaining the differences between the account balances and financial records.
The five main types of reconciliation are:
Determine the general ledger account that needs reconciling and the best source to compare with. Ensure the dates align.
Perform a tick and tie, that is, match every transaction in the general ledger with the corresponding transaction in the second record.
Note down all the items that do not match. You should also compare the account balances and note any discrepancies.
Analyze and investigate any transaction without a match. That could be internal data analysis of the general ledger or the second source.
If the two accounts do not match, make adjustments. There could be transaction errors, omitted bank transaction fees, outstanding checks, or deposits in transit that reflect on one account but not the other.
Make the necessary adjustments by posting the required journal entries if the entries have supporting evidence. Confirm the new general ledger balance. If they do not balance, repeat the steps.
Keep the reconciling documents as evidence during auditing.
The main advantages of reconciling accounts include:
There’s no universally accepted way to conduct account reconciliation, although the generally accepted accounting principles (GAAP) call for double-entry accounting. That means recording every entry twice in the general ledger (credit and debit account).
The traditional way of doing account reconciliation involved employing several accountants to carry out the reconciliation manually. As you’ve probably deduced by now, it was a tedious, time-consuming process rife with errors. That’s where automated account reconciliation came in handy.
With automation, AI can conduct the tick-and-tie process faster and more accurately than humans can. That leaves the accountant room to conduct the investigative part of the reconciliation from the derived report.
However, automation is costly as the software provider has to customize the tool to your workflow. That’s why you should consider outsourcing. When you outsource your account reconciliation to a firm such as Gurian PLLC, you’ll receive expert and professionally reconciled accounts.
Whether you’re a big, medium, or small business, Gurian CPA Firm will balance and close your accounts accurately and timely.
Accounting reconciliation involves comparing all the entries in a general ledger and comparing it with a second source. It is a tiresome task best left to automation.
Since automation is beyond mid and small companies, they would be better off outsourcing the accounts reconciliation to firms like Gurian CPA. Contact us for professional, timely, and expertly done account reconciling.