Transcript Basic Accounting Principles

1. Definition of a Reconciliation
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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. This is done by making sure the balances
match 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.
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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.
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If the account has been reconciled monthly, then only the activity in the
last month must be reconciled.
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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.
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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:
1. FinancialLink – make sure you are set up with an access
login through your department’s DSA (Departmental Security
Administrator).
2. Microsoft Excel
3. 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 2.
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 do 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.
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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: do not limit your search to only
one fund.
1. Log into FinancialLink.
2. Click Reports.
3. Click the dropdown arrow next to Ledger and Detail Reports.
4. Click General Ledger.
5. Update the accounting
period to reflect the
period you are
reconciling.
6. Type the Account #.
7. Click Submit 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.
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Analyze section {C} Variance between the {A} Dept Sub-ledger and the {B}
General 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.
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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.
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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).
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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:
[email protected]
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 [email protected] 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 [email protected] and we will
inactivate the account. Once the account has been inactivated, you
will no longer be asked to provide a reconciliation.
Question: Why does each account have a Preparer and Owner 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.
Question: Our account is much more difficult than the example in
this tutorial. We could use additional help.
Answer: General Accounting offers training on Balance Sheet
Account Reconciliation upon request. Please email
[email protected]
Please email [email protected]