Accounts Reconciliation Blog

The success of a business can be attributed to a very good financial statement. This paves way to a smooth operation of the business. Therefore, constant accounts payable reconciliation should be practiced by any organization. It plays a very vital role in increasing the profit margins of a company. This eliminates the penalty costs brought by delayed or duplicate payments.

Since accounts payable reconciliation greatly contributes to business growth, it should be done perfectly and accurately. This is usually done by comparing the listings on general ledger and subsidiary ledger. General ledger takes the total amount or sum of accounts payable while subsidiary ledger contains the detailed information of the account. Their values should match all the time. Should there be discrepancies, thoroughly review items and try to spot if possible recording errors were made.

In every business, it is important to reconcile balance sheet accounts at the end of every period as part of the closing process. This could be every month, quarter, or year-end. By doing so, you will be able to identify if there are any errors before closing. You have to do accounts payable reconciliation and accounts receivables reconciliation.
 
The balance sheet account reconciliation is the comparison of the account’s general ledger trial balance with another source. It could be internal like a subledger, or external like a bank statement. Differences in the timing of transactions, such as outstanding checks, are identified as reconciling items.

Every business needs a chart of accounts to smoothly run the accounting department. Below is a list of the different accounts.

1 – The assets accounts include any income or property owned by the business. This include bank accounts, accounts receivable, the land if owned and building, any vehicles, supplies, furniture and machines including computers.
2 – The liability accounts are any money that the business owes. This includes accounts payable, any taxes owed and if there are any bank loans.
3 – The revenue accounts include any sales revenue, sales discounts, sales returns and allowances and any interest income.
4 – With the expense account any business expenses go in here. This includes bank fees, depreciation expense, rent expense, income tax expense, utilities, advertisement costs and payroll tax costs.

These are all used in the accounts payable reconciliation which is done monthly.

A bank reconciliation is done when you receive a statement from the bank. If you are handling the accounting for a small business this is what you need to know about bank reconciliation. There are two basic types of bank reconciliation. The first one is reconciling not requiring  adjustment on the books and the second one is reconciling requiring adjustment on the books.

The reconciling items that do not require adjustments are bank errors, outstanding checks and deposits in transit. The reconciling items that do require adjustment are errors in the cash account, unrecorded returned checks (NSF), unrecorded bank charges and unrecorded bank collections.