Balance sheet account reconciliation tutorial

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1 Definition of a Reconciliation Importance of a Reconciliation When to Prepare a Reconciliation Items Needed to Prepare a Reconciliation Key Terms Example of a Reconciliation Reconciliation Instructions Approval and Submission FAQs In accounting, Reconciliation refers to the process of ensuring that two sets of records are in agreement Reconciliation is used to ensure that the transactions going through an account match the actual money spent The objective is to report the correct amount in the general ledger the balances match This is done by making sure at the end of a particular accounting period For example, we reconcile the balance in the general ledger account ” Cash “ to the balance shown on the bank statement  Two Records - A proper reconciliation requires obtaining all of the activity in two records (department sub-ledger and the general ledger) since the last time they were reconciled and comparing them to find where any difference(s) occur  Difference in Two Records - A difference between the two records can highlight a posting error within your department; internal entities, such as Payroll or Disbursements; external entities, such as the bank or loan company; or even something much more significant: fraud Timeliness- It is best practice to reconcile an account monthly, following month-end close   ◦ If the account has been reconciled monthly, then only the activity in the last month must be reconciled ◦ If the account has not been reconciled monthly, you will need to reconcile back to the last month that it had been reconciled If you cannot locate a reconciliation for the account, you should complete a reconciliation for the current fiscal year ◦ Reconciliations are much easier to do, and differences are easier to resolve, if they are done monthly Doing reconciliations monthly will save time and effort and any corrective action can be taken to resolve issues Submission - General Accounting requires balance sheet account reconciliations be submitted on a quarterly basis Access to: FinancialLink – make sure you are set up with an access login through your department’s DSA (Departmental Security Administrator) Microsoft Excel Department’s Sub-ledgers Balance Sheet Accounts are used in the general ledger and represent the assets and liabilities of the University Asset accounts start with 1, and liability accounts start with Balance Sheet Reconciliation is a template in which data from a balance sheet account is entered from the Department Sub-ledger and the General Ledger in order to analyze and identify any differences { A } Department Sub-ledger refers to the sub-system, list, record, external statement, etc maintained by a department detailing the balance in the account Example: A key deposit account should have a sub-ledger that lists all outstanding deposits by amount, name, and date {B } General Ledger is a record of financial transactions at UCSD used to produce financial reports, such as a balance sheet and income statement {C } Variance is any difference(s) between items listed on a {A } Department Sub-ledger and the {B } General Ledger {D } Reconciling Items are any items from the {A } Department Subledger and {B } General Ledger that not match These items need to be researched to ensure they are legitimate and will be matched in a future month Any errors need to be corrected  A proper reconciliation is comprised of four parts: ◦ { A } Dept Sub-ledger Account Balance ◦ { B } General Ledger Balance ◦ { C } Variance ◦ { D } Reconciling Items    Items on the { A } Dept Sub-ledger are matched against the items on the { B } General Ledger The { C } Variance should be zero Any remaining items that are not matched are classified as { D } Reconciling Items Take items from your dept sub-ledger and enter them into the section of the reconciliation sheet called { A} Dept Subledger Account Balance Next, get the account balance per the General Ledger in FinancialLink Recommended: not limit your search to only one fund Log into FinancialLink FinancialLink Click Reports Reports Click the dropdown arrow next to Ledger and Detail Reports Reports Click General Ledger Ledger Update the accounting period to reflect the period you are reconciling Type the Account # # Click Submit Form Form Recommended: Check the boxes to see Db/Cr Indicators Take the balance from the general ledger report and enter it into section {B} General Ledger Balance on the reconciliation sheet   Analyze section { C} Variance between the {A} Dept Sub-ledger and the {B} General Ledger Ledger Is the variance zero? If so, you are done! If the {C} Variance is NOT zero, you need to identify the {D} Reconciling Items These items can be journal entries not recorded in that period in FinancialLink or timing differences that will clear in future months After the reconciling items have been identified, Unreconciled Balance should be zero  Once the reconciliation(s) are completed, the reconciliation must be verified and approved  The review and approval is typically performed by a supervisor to verify that the reconciliation meets the standard as outlined  A link to the form is included in the email you receive from the Balance Sheet Coordinator If you are unable to locate that link, go to Blink and search for Confirmation of Balance Sheet Account A new form is posted for each quarter  Type directly into this document, then save and print Type the Account information - number and title   The next portion is for the Reconciliation Preparer and Supervisor signatures By signing the form, you agree that the reconciliations are complete and accurate Please note that for audit purposes, the Preparer and Supervisor (Approver) need to be two different people  The bottom of the form reminds you where to submit your reconciliation(s)  Make sure to submit a copy of the reconciliation for each account named on the form as supporting documentation  You can submit one confirmation form for multiple account reconciliations provided the account numbers are all listed on the form in the proper location and all reconciliation supporting documentation is attached Please send all submissions to: BALSHEETACCTS@UCSD.EDU Question: Who should the reconciliation? Answer: This varies from department to department The person responsible for updating the General Ledger (and/or keeping the department schedule up to date) should NOT be the same person performing the reconciliation Question: The worksheet I receive each quarter listing the accounts and owners is incorrect or incomplete Answer: Please email BALSHEETACCTS@UCSD.EDU with the necessary corrections Please correct the worksheet and send it back, with corrections highlighted in yellow Question: I receive the worksheet each quarter asking for a reconciliation, but the account has a zero balance Answer: A certification should still be sent to General Accounting stating the account has the correct balance, in this case, zero If the account has activity within the quarter even with a zero balance, a reconciliation still needs to be completed Question: The account I am being asked to reconcile will not be used again, and has a zero balance Answer: Please email BALSHEETACCTS@UCSD.EDU and we will inactivate the account Once the account has been inactivated, you will no longer be asked to provide a reconciliation Q uestion: Why does each account have a Preparer and O wner field? Answer: Each reconciliation must be signed off by two different people The person who does the reconciliation; and the person that approves the reconciliation One person cannot both prepare and approve the reconciliation Q uestion: Our account is much more difficult than the exam ple in this tutorial We could use additional help Answer: General Accounting offers training on Balance Sheet Account Reconciliation upon request Please email BALSHEETACCTS@UCSD.EDU Please email BALSHEETACCTS@UCSD.EDU [...]... does the reconciliation; and the person that approves the reconciliation One person cannot both prepare and approve the reconciliation Q uestion: Our account is much more difficult than the exam ple in this tutorial We could use additional help Answer: General Accounting offers training on Balance Sheet Account Reconciliation upon request Please email BALSHEETACCTS@UCSD.EDU Please email BALSHEETACCTS@UCSD.EDU... correct the worksheet and send it back, with corrections highlighted in yellow Question: I receive the worksheet each quarter asking for a reconciliation, but the account has a zero balance Answer: A certification should still be sent to General Accounting stating the account has the correct balance, in this case, zero If the account has activity within the quarter even with a zero balance, a reconciliation. .. to be completed Question: The account I am being asked to reconcile will not be used again, and has a zero balance Answer: Please email BALSHEETACCTS@UCSD.EDU and we will inactivate the account Once the account has been inactivated, you will no longer be asked to provide a reconciliation Q uestion: Why does each account have a Preparer and O wner field? Answer: Each reconciliation must be signed off... submit your reconciliation( s)  Make sure to submit a copy of the reconciliation for each account named on the form as supporting documentation  You can submit one confirmation form for multiple account reconciliations provided the account numbers are all listed on the form in the proper location and all reconciliation supporting documentation is attached Please send all submissions to: BALSHEETACCTS@UCSD.EDU... the section of the reconciliation sheet called { A} Dept Subledger Account Balance Next, get the account balance per the General Ledger in FinancialLink Recommended: do not limit your search to only one fund 1 Log into FinancialLink FinancialLink 2 Click Reports Reports 3 Click the dropdown arrow next to Ledger and Detail Reports Reports 4 Click General Ledger Ledger 5 Update the accounting period... items have been identified, Unreconciled Balance should be zero  Once the reconciliation( s) are completed, the reconciliation must be verified and approved  The review and approval is typically performed by a supervisor to verify that the reconciliation meets the standard as outlined  A link to the form is included in the email you receive from the Balance Sheet Coordinator If you are unable to locate... locate that link, go to Blink and search for Confirmation of Balance Sheet Account A new form is posted for each quarter  Type directly into this document, then save and print Type the Account information - number and title   The next portion is for the Reconciliation Preparer and Supervisor signatures By signing the form, you agree that the reconciliations are complete and accurate Please note that... Question: Who should do the reconciliation? Answer: This varies from department to department The person responsible for updating the General Ledger (and/or keeping the department schedule up to date) should NOT be the same person performing the reconciliation Question: The worksheet I receive each quarter listing the accounts and owners is incorrect or incomplete Answer: Please email BALSHEETACCTS@UCSD.EDU... Ledger Ledger 5 Update the accounting period to reflect the period you are reconciling 6 Type the Account # # 7 Click Submit Form Form Recommended: Check the boxes to see Db/Cr Indicators Take the balance from the general ledger report and enter it into section {B} General Ledger Balance on the reconciliation sheet   Analyze section { C} Variance between the {A} Dept Sub-ledger and the {B} General Ledger... A proper reconciliation is comprised of four parts: ◦ { A } Dept Sub-ledger Account Balance ◦ { B } General Ledger Balance ◦ { C } Variance ◦ { D } Reconciling Items    Items on the { A } Dept Sub-ledger are matched against the items on the { B } General Ledger
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