What does reconciliation mean in accounting?

Definition: Reconciliation is the process of comparing transactions and activity to supporting documentation. Further, reconciliation involves resolving any discrepancies that may have been discovered.

What is reconciliation in accounting examples?

Examples of reconciliations are:

  • Comparing a bank statement to the internal record of cash receipts and disbursements.
  • Comparing a receivable statement to a customer’s record of invoices outstanding.
  • Comparing a supplier statement to a company’s record of bills outstanding.

What is the true meaning of reconciliation?

Reconciliation is the process of two people or groups in a conflict agreeing to make amends or come to a truce. Reconciliation is also the name of a Catholic sacrament involving the confession of sin.

What is the difference between balancing and reconciling?

For a step-by-guide on balancing your account, see the accompanying article, “How to balance your checkbook: A skill for individuals and 4-H group treasurers.” Reconciling is when you compare what the bank shows as transactions to what you, the account holder, have recorded for transactions.

Why do we reconcile accounts?

Reconciling your accounts is important because it helps detect any mistakes, discrepancies, or fraud in your accounting books that could severely impact the financial health of your company. Reconciliation is a good business practice that can help the success of a business.

What is reconciliation in payment?

Payment reconciliation is an accounting process that verifies account balances to ensure all sets of records are true, consistent, and up-to-date. Businesses can reconcile their accounts daily, weekly, or monthly.

What is ledger reconciliation?

A general ledger reconciliation is an activity performed by accountants to verify the integrity of account balances on the company’s general ledger.

How is reconciliation done?

To do a bank reconciliation you would match the cash balances on the balance sheet to the corresponding amount on your bank statement, determining the differences between the two in order to make changes to the accounting records, resolve any discrepancies and identify fraudulent transactions.

How do you reconcile TB and GL?

To complete a general ledger reconciliation, accountants typically follow these steps:

  1. Obtain necessary details of the general ledger account.
  2. Reconcile ending account balances to supporting documentation.
  3. Investigate discrepancies.
  4. Prepare adjusting journal entries, if necessary.
  5. Accuracy.
  6. Prevention.
  7. Adjustments.