Account reconciliation refers to the routine process of independently verifying account balances between different records to identify discrepancies that require resolution.
Key Features
- Periodic comparisons are made between statement balances from banks/clients/vendors and an entity’s internal accounting records
- Variances emerge due to timing lags in transaction processing between counterparties
- Reconciling items like deposits-in-transit, missed charges, or incorrect allocations are noted for correction in the general ledger
- Robust systems automate comparisons for efficiency while manual review catches non-systemic errors
Example
For example, an auditor examining cash reconciliations uncovered multiple stale-dated outstanding checks that had escheated to the state as unclaimed property, requiring disclosure as income.
Key Takeaways
Timely reconciliations promote accuracy across all records supporting financial reporting, reduce erroneous processing, and facilitate dispute resolution with external parties. Comprehensive policies ensure complete agreement on all current balances.