General Ledger Reconciliation and Analysis Definition
Define a general ledger as the financial record of every transaction of a company. Commonly, it is referred to as the “books” of the company. In the general ledger, record each of the transactions twice as both a subtraction (debit) and addition (credit). The general ledger is the main accounting record of the company.
Consequently, general ledger reconciliation is the process of ensuring that accounts contained in the general ledger are correct. In short, reconciliation makes sure you place the appropriate credit and debit in the associated accounts. Seemingly simple, this process requires an experienced bookkeeper when applied to small companies. Complicated applications require the hand of a trained CFO or equivalent controller. In either situation, a general ledger reconciliation policy must by enacted to ensure consistency.
General Ledger Reconciliation Explanation
Not every general ledger account has a detail subsidiary ledger to reconcile to. Monthly all balance sheet accounts should be analyzed for accuracy. In addition, periodically it may be necessary to reconcile revenue accounts, expense accounts and miscellaneous balance sheet accounts.
In these cases the procedures are similar to reconciling an account to a subsidiary ledger. Print a detail general ledger transaction report for the account. Then, eliminate reversing journal entries correcting errors. Finally, investigate any transactions that are unusual in nature. For example a debit entry or decrease to a revenue account would be unusual.
Finally, prepare a detailed schedule of transactions remaining in the final balance.
General Ledger Reconciliation Process
Some wonder “what is general ledger reconciliation?”. Others wonder how to do general ledger reconciliation. For bookkeepers, adhere to the following process:
First, study the accounting policy of the company. Ignorance to this is missing the essential foundation of the process; knowing the rules is key.
Then, gather information. These include receipts, invoices, account statements, invoices, and related financial reports. This data is the information the accounting staff puts into accounts.
Third, ask questions about the accounts. What items did the company purchase? Do they relate to company policy? Why are they included in the given account? When were they spent/made?
Finally, document your work. Proper documentation ensures properly reconciled accounts as much as it ensures effective bookkeeping in the first place.
General Ledger Reconciliation Template
A general ledger reconciliations template can be found at: Microsoft Templates.
Originally posted by Jim Wilkinson on July 23, 2013.