Reconciliation in Accounting: Definition, Purposes, and Types

What Is Reconciliation?

Reconciliation is an accounting procedure that compares two sets of records to check that the figures are correct and in agreement. Reconciliation also confirms that accounts in a general ledger are consistent and complete. Reconciliation can be used for personal as well as business purposes.

Account reconciliation is particularly useful for explaining any differences between two financial records or account balances. Some differences may be acceptable because of the timing of payments and deposits. Unexplained or mysterious discrepancies, however, may warn of fraud or cooking the books. Businesses and individuals may reconcile their records daily, monthly, quarterly, or annually.

Key Takeaways

  • Companies use reconciliation to prevent balance sheet errors on their financial accounts, check for fraud, and make sure that transactions were appropriately booked to the general ledger.
  • In double-entry accounting, each transaction is posted as both a debit and a credit.
  • Individuals can also use reconciliation to check the accuracy of their bank and credit card account statements.

How Reconciliation Works

There is no standard way to perform an account reconciliation. However, generally accepted accounting principles (GAAP) require double-entry bookkeeping—where a transaction is entered into the general ledger in two places—making it the most prevalent tool

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Reconciliation Deal Pulls Accounting Rulemaker Into Tax Politics

A panel of unelected accountants in suburban Connecticut would enjoy an outsized position in shaping tax policy for the nation’s biggest corporations underneath a provision inside Senate Democrats’ sweeping tax, local weather, and healthcare bill.

The draft laws works by using a edition of organization money, as calculated beneath US monetary accounting policies, to identify what firms owe in taxes. It is made to make certain that large businesses creating huge “book” gains get taxed at a bare minimum price of 15%. It places pressure on what providers report in their monetary statements, the principles for which are crafted by the Money Accounting Standards Board.

Any transfer the seven-member rulemaker can make to adjust what figures providers report could affect the likes of Inc., Apple Inc., and AT&T Inc. Providers could be keen to deal with down their earnings to prevent massive tax payouts, and they will be scrutinizing these moves. Congress, much too, could consider more desire in the operate of the personal-sector board.

The process of location accounting procedures is intended to be unbiased, concentrating only on defining the figures providers report, so investors, collectors, and analysts get perception on their economic health and fitness. When politics

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