What does it mean to reconcile a balance?

What does it mean to reconcile a balance?

Balance sheet reconciliation verifies the accuracy of the balance sheet by comparing the numbers on the general ledger to other forms of documentation, to explain any discrepancies. Essentially, reconciliation is done to verify that accounting for a certain period has been accurately portrayed on a company’s books.

What happens when you reconcile an account?

Reconciliation confirms that the recorded sum leaving an account corresponds to the amount that’s been spent and that the two accounts are balanced at the end of the reporting period. Reconciliation is used by accountants to explain the difference between two financial records, such as the bank statement and cash book.

Does reconcile mean cashed?

So the key difference is that ‘cleared’ applies to a single transaction’s amount, and ‘reconciled’ applies to groups of transactions and the balances on a statement.

What is an example of Reconcile?

An example of reconcile is the act of two friends making up after a bitter fight. An example of reconcile is for a person to be forced into a particular career. An example of reconcile is to check your checking book balance against your checking statement. To restore a friendly relationship; to bring back to harmony.

Why do we reconcile accounts?

Reconciling your accounts is important because it helps detect any mistakes, discrepancies, or fraud in your accounting books that could severely impact the financial health of your company. Reconciliation is a good business practice that can help the success of a business.

What accounts should be reconciled?

Typically, balance sheet reconciliations involve the closing of the following accounts:

• Cash.
• Accounts Payable.
• Accounts Receivable.
• Payroll Liabilities.
• Accrued Liabilities.
• Loans and Debt.
• Prepaid Expenses.
• Inventory.

What are the reasons for reconciliation?

Here are five compelling reasons why your reconciliations should be performed monthly.

• Catch Errors. Misread receipts, transposed numbers and forgotten entries in the check register are common accounting errors and are easily rectified.
• Avoid Surprises.
• Save Money.
• Verify Cash Flow.
• Prevent Fraud.

What Does reconcile mean on bank statement?

When you reconcile your bank account you are comparing the transactions recorded in your accounting software with the transactions shown on your bank statement. You need to adjust your accounting records to agree with the bank and record monthly fees and electronic fund transactions.

What’s the difference between cleared and reconciled?

“Cleared” = generally means that the money has been debited from your account (the money has cleared the bank). “Reconciled” = means that the tranaction has appeared on your bank statement, and has been accounted for.