Reviewed by Oct 05, 2020| Updated on
Reconciliation is a procedure in accounting under which two sets of data are compared in order to check if the figures in the agreement are correct. Account reconciliation will also help in confirming that the accounts in the ledger are accurate, complete, and consistent throughout. This process is specifically of great use in putting across the variations among two fiscal records.
There can be differences that are still acceptable as payment timings and deposits have their impact on them. Discrepancies that are unexplainable or have resulted out of nowhere can be indicative of scams and frauds. Individuals and business organisations reconcile their set of accounting records on a daily, monthly, or annual basis.
Some individuals have their accounting books reconciled frequently with credit card statements on making a comparison of their cheques, credit, and debit card receipts with their respective credit card and bank statements. This sort of reconciliation of accounts will make it possible for individuals to find out if there is any fraudulent activity happening on their account.
On getting their accounts reconciled, individuals will ensure that their banks and lenders have not made any glitches with their accounts. This also gives individuals with an overview of their spendings.
Individuals must see that the transactions must match with the records they have retained. If there are checking accounts being handled, then factors, such as outstanding cheques and deposits must also be considered.
Businesses must get their accounts reconciled in order to alleviate errors, frauds, and ultimately be good on the accounts of auditors. Businesses typically get their balance sheets reconciled every month. The books of accounts are closed after the records are reconciled. This kind of reconciliation consists of reviewing balance sheets to ensure that all transactions are correctly recorded in the main ledger account.