Burnish Bookkeeping LLC - Monthly Reconciliation

Account reconciliation is the monthly process of making a comparison of internal financial records against statements from outside sources—like a credit card company, bank, or additional financial institution—to ensure they match up. Understanding how to accurately reconcile your accounts is important for the financial health of your company, as it assists in detecting any fraud, discrepancies, or errors.

Examples of Account Reconciling

When an organization reconciles its bank statement, it’s reconciling the balance within its general ledger account Cash with a bank's details.

Before issuing an organization's financial statements, it’s smart to reconcile each balance sheet account by gathering the details that supports the accounts' ending balances. For instance, the AR balance might start by comparing the balance with an aging of the AR.

One other instance is reconciling the balance within the general ledger account Utilities Payable. It may be achieved by computing the day-to-day cost of every utility that the business uses. The cost per day then is multiplied by the quantity of days since the last meter reading date displayed on the utility bills which already have been recorded.

Why Should You Reconcile Your Accounts?

Comparing balances and transactions is vital because it aids in avoiding overdrafts on cash accounts, catches overcharged or fraudulent transactions on credit cards, explains differences in timing, and spotlights other negative activity, like theft or improperly recorded expense and income entries. It’ll save your business from paying overdraft charges, keeps transactions free of errors, and assists in catching incorrect spending and problems like embezzlement before they get out of hand.

Also, comparing transactions and reconciling accounts helps the accountant produce high-quality, accurate, and reliable financial statements. Because your business balance sheet reflects all funds spent—whether loans, credit, or cash—and all assets bought with these funds, the accuracy of a balance sheet depends upon the accurate reconciliation of your organization's financial accounts.

Publicly held businesses must keep their accounts steadily reconciled or risk being penalized by an independent auditor. Most corporations have systems for sustaining payment receipts, account statements, and additional data needed to support and document account reconciliations.

For more information about our monthly reconciliation services please feel free to get in touch with Burnish Bookkeeping LLC today at 910-231-9538.