Share On

Reconciliation Definition

Reconciliation in accounting is the process of confirming whether one set of records match the counterpart set of records to identify the existence of irregularities, which might have been made by the bank or the owner of the account. The comparison determines the reliability of the bank records with that of the company’s records. Reconciliations may take place on a daily, monthly, or yearly basis. The process is done by determining whether the amount parting from an account is similar to the expenditure amount over the same period of time. The Generally Accepted Accounting Principles (GAAP) states that accuracy and consistency in financial accounting are the main focus of reconciliation accounting.

Benefits of Reconciliation

  • It prevents overdrafts of cash accounts
  • It helps to keep the credit limit amount on credit cards in check.
  • It detects fraudulent activities, errors in the transaction, other incorrect or duplicate charges.
  • It helps the users get a perspective on the overall expenditure and helps them maintain a budget.
  • It clarifies whether any mistakes have been made by the financial institution or not.

Reconciliation Methods

  • Documentation review: it is the most popular and common form of reconciliation. It is done by examining the existing records. It ensures the reliability of the financial holder as well as the bank. Thus, every balance sheet of a company must be reconciled with the bank statement to get an accurate perspective on expenditure.
  • Analysis review: it includes the various stages of analytics by comparing between account and bank statements with that of the existing records of the company to deduce irregularities. It is an important method as it gives the analyzer a holistic outlook of their daily expenditures, as well as the irregularities if there are any.

Types of Reconciliation

  • Supplier Statement Reconciliation: It is the reconciliation of individual suppliers’ balance in the subsidiary ledger with that of the statement provided by the supplier. It is issued regularly to a business by its supplier of goods and services.
  • Bank Reconciliation: The reconciliation is done between a company’s records and bank statements. The statements and the records may at times not match due to the differences that may have been caused by outstanding checks, deposit in transit or due to errors made either by the company or by the bank. Bank reconciliation statements are issued to set out the entries that have caused the initial differences.
  • Double Entry Reconciliation: entries in two columns each of every financial transaction are made by an accountant. The entries are made on the basis of credit column, where the amount number is noted as a long-term debt and the same amount is entered as debits in the cash column.
  • Position Reconciliation: This reconciliation is achieved by comparing balances between two or more sources. It is a verification method to determine whether the company’s assets holding in the counterparty is similar to the counterparty’s claim of the company’s assets holdings or not.
  • Trade Reconciliation: a record of trading done on each day is supposed to be similar to the records of the number of tradings done by the end of the day. It helps the firm to keep tracks of each trading transaction.

 

MiFID II data reconciliation: A practical guide

White Paper By: Duco

Data risk is an increasing challenge in the financial industry, for the innumerable processes that need to be taken care, before reporting the data to the regulators. It is extremely important to stay complaint and maintain data quality for Markets in Financial Instruments Directive II (MIFID II) during data reconciliation. Duco Cube with its powerful and flexible reconciliation platform...

MiFID II / MiFIR Transaction Reporting: A Practical Guide

White Paper By: Duco

One of the main criticisms of the original MiFID was that national regulators did not enforce the directive with the same zeal across Europe. The list of financial instruments covered has been extended to almost all instruments traded in European markets – with particular emphasis on the OTC derivatives market that was previously out of scope for MiFID I. The issue with making this...

5 Ways Electronic Invoicing Helps Businesses Get Paid Faster

White Paper By: Basware

Electronic invoicing delivers efficiencies across the accounts receivable cycle: invoice creation, invoice delivery, dispute management, posting, and reporting and analytics. Most impor­tantly, reducing Days Sales Outstanding (DSO) with electronic invoicing enables businesses to reinvest more quickly to drive company growth. This white paper details the inefficiencies of...

Transaction Reporting – what’s changing?

White Paper By: AutoRek

Transaction Reporting is one of the key priorities for regulators. Some are already warning that there will be no latitude for non-compliance, including late reporting. The aim of Transaction Reporting is to assist EU regulators in the detection and investigation of suspected market abuse. By implementing a robust, automated financial control regime, investments firms will ensure readiness...

8 Financial Reports Every Facilities Manager Needs (and Every CFO Loves)

White Paper By: ServiceChannel

Facilities managers are tasked with all kinds of responsibilities, from ensuring the look and feel of a company’s locations remains in top notch order to literally keeping the lights on. Being a facilities manager is critical to maintain visibility into all aspects of the operations, particularly from the financial perspective. This whitepaper discusses all the metrics that are...

Does Your Finance Department Consume Your Time Or Add Value?

White Paper By: Consero Global Solutions

Not having a clear financial picture of your company can lead to disaster. Growth can put a tremendous strain on your financial department: the people, processes and technology necessary for the company to continue successfully. Today, organizations are squeezing their finance and accounting functions like never before. Migrate to an enterprise-level accounting package that is connected to...

2018 All Rights Reserved | by: www.ciowhitepapersreview.com