Accounts Reconciliation


What is Accounts Reconciliation?


Bank Reconciliations:

Purpose:- Reconciling the company's cash records (general ledger) with the bank's records (bank statement).

Process:- Comparing the transaction in the bank

statement (deposits, withdrawals, fees) with the company's cash account in the general ledger. Adjustments are made for outstanding checks, deposits in transit, bank errors, and other discrepancies.

2. Accounts Receivable Reconciliation:

Purpose:- Ensuring that the accounts receivable (amounts owed by customers) recorded in the general ledger match the details in the subsidiary ledger or customer statements.

Process:- Matching individual customer balances with the accounts receivable control account in the general ledger. Investigating and resolving differences due to unapplied payments, billing errors.

3. Accounts Payable Reconciliation:

Purpose:- Verifying that the accounts payable (amounts owed to vendors) recorded in the general ledger align with vendor invoices and statements.

Process:- Comparing vendor balances in the accounts payable ledger with the general ledger. Addressing discrepancies caused by unmatched invoices, prepayments, vendor credits, or billing mistakes.

4. Fixed Assets Reconciliation:

Purpose:- Fixed Asset Reconciliation is the process of verifying that the balances in the fixed asset register match the corresponding general ledger accounts.

Process:- Ensures that the fixed asset register

matches the general ledger accounts for fixed assets, including any additions, disposals, and depreciation.

5. Intercompany Reconciliation:

Purpose:- Balancing transactions and balances between different entries or divisions within the same organization.

Process:- Reviewing transactions between intercompany accounts to ensure consistency and accuracy. Resolving discrepancies caused by intercompany loans, transfers, sales, or expenses.

6. Inventory Reconciliation:

Purpose:- Validating the accuracy of inventory records in the general ledger against physical inventory counts.
Process:- Conducting physical inventory counts and comparing them with the inventory balances in the general ledger. Adjusting for shrinkage, spoilage, or discrepancies between book inventory and actual quantities.

7. Payroll Reconciliation:

Purpose: Verifying payroll transactions and deductions recorded in the general ledger against payroll reports and employee records.

Process: Comparing payroll expenses, tax withholdings, and benefit contributions in the general ledger with payroll reports from the payroll system. Resolving discrepancies related to employee salaries, payroll taxes.

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