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Total assets = Total liabilities + Total equity. It’s the fundamental accounting equation. 

But how vì thế you kiểm tra that your assets, liabilities, and equity are correct? The answer is with balance sheet reconciliations. 

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Balance sheet reconciliations are a vitally important part of a company’s financial reporting process. They provide tư vấn and evidence that the numbers are accurate. They are done at regular intervals and are a part of routine accounting procedures.

Balance Sheet Reconciliations

When accountants “close the books,” they complete reconciliations of the balance sheet accounts.

Closing the books is an accounting term used at the over of a month, quarter, or year. It’s sometimes called month-end close or monthly close, and it’s when accountants verify that the numbers on the financial statements are correct.

During the closing process, the reconciliation process typically starts with the balance sheet. Accountants will reconcile:

• Cash
• Accounts receivable
• Accounts payable
• Credit cards
• Fixed assets
• Prepaid expenses
• Deferred revenue
• Debt
• Equity

A reconciliation compares the balances in the general ledger with other supporting documentation to lớn verify the accuracy of the general ledger balance.

Supporting documentation can include ngân hàng statements, subsidiary ledgers, and payment schedules. 

If the general ledger balance doesn’t match the supporting documentation, that’s ok and common. These differences are called reconciling items, and you’ll need to lớn understand what they are. 

Sometimes reconciling items occur from timing differences. Like when a kiểm tra you’ve written hasn’t cleared the ngân hàng. 

Other times, reconciling items occur from errors. Maybe you forgot to lớn record a few journal entries or mistyped a number. Discovering these bookkeeping errors takes a lot of time and energy. Automation of the reconciliation process with FloQast can reduce errors and improve workflow. 

How To Do a Balance Sheet Account Reconciliation

When reconciling your ngân hàng accounts, your accounting software likely has a ngân hàng reconciliation module built-in.  For all other balance sheet accounts, you’ll likely have to lớn create your own reconciliation. 

Reconciling Cash Accounts

➽Step 1:  Print or tải về the general ledger for the cash tài khoản you’re reconciling.

➽Step 2: Print or tải về ngân hàng statements for the tài khoản you’re reconciling.

➽Step 3: Compare transactions from the general ledger to lớn the ngân hàng statement.

➽Step 4: Make a note of all differences between the general ledger and the ngân hàng statement.

➽Step 5: Investigate the differences. 

➽Step 6: Make corrections to lớn the general ledger tài khoản, if necessary.

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Reconciling other balance sheet accounts

When reconciling other balance sheet accounts, you’ll generally follow the same steps, but your supporting documents will be different. 

The Importance of Balance Sheet Reconciliations

Accurate financial reporting relies on an accounting process with solid internal controls. And one of the most important internal controls is the balance sheet reconciliation process. Without it, business owners lack confidence in their financial statements.

Reconciliations are necessary to lớn avoid inaccurate information. Balance sheet reconciliations help you:

• Catch errors
• Identify weaknesses in internal controls
• Detect fraud
• Manage cash flow

Armed with a reconciled balance sheet, you’ll be more confident in making business decisions.

Examples of balance sheet reconciliations

Here’s a quick look at what a simple ngân hàng reconciliation may look lượt thích.  

You’ll notice the top of this reconciliation starts with the ngân hàng statement’s ending balance and then adds and subtracts entries you have on your general ledger that the ngân hàng hasn’t seen.

And the bottom half of the reconciliation starts with the balance of the general ledger and then adds and subtracts entries that appear on the ngân hàng statement that you haven’t seen.

In the over, the final adjusted cash balances should match. In our example, we’ll need to lớn record journal entries with a debit of $2 for the interest revenue and a credit of $13 for the monthly service fee. 

If you were reconciling fixed assets, a simple reconciliation might look lượt thích this.

In this example, the details on the fixed assets would be supported by invoices from when you purchased the assets. And the accumulated depreciation amount would come from your depreciation schedule.  

Balance Sheet Reconciliation Template

Start with your trial balance as the launch point for your balance sheet reconciliation process. With all your accounts summarized into a column layout, you can go down the list, ensuring you have a reconciliation for each balance sheet tài khoản. 

A simplified example might look lượt thích this.

The column on the far right represents where you completed the reconciliation. For cash, the ngân hàng reconciliation is located on a reconciliation labeled A-1.

Income statement accounts usually aren’t reconciled. That’s because balance sheet accounts are an accumulation of transactions from day one at your business. In comparison, income statement accounts are zeroed out at the start of each year. 

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Just because you’ve been doing balance sheet reconciliations manually since the beginning of time doesn’t mean you’re stuck with it. With reconciliation software, you can put the spreadsheets, pencils, and papers away. 

Automating your reconciliations will:

• Save time
• Lower costs
• Reduce risk
• Increase compliance

Learn how FloQast’s AutoRec can help automate the tedious process of month-end close.