Question

16. What does it mean to say that figures should be reconciled? (100 words)

Answer 1

Reconciliation of figures meaning:

It is an accounting action that compare the transactions of two accounts to ensure transaction recorded using company’s internal record keeping against external sources like bank or other financial institution are correct and matching with each other at the end of reconciling period.

There are 2 types of account reconciliations:

* Bank reconciliations which compare's the bank records with the company's maintained cash account (ledger accounts). Reconciliation helps in ensuring that company's records and Bank records are correct and no fraud is happened.

* Company's general ledger with the sub ledger reconciliations where general ledger balance is matching with the total of sub ledger accounts. Some of the sub ledger accounts are accounts receivable, accounts payable and prepaid accounts etc. In this case sub ledger is used and compared to ledger balance.

Reconciliation helps company to find fraud and protect company from worker fraud. Reconciliation sometime reveal entries in the financial statement that are not in your accounting records. For example, reconciliation helps transactions which you have entered that the bank has not yet processed. This are called deposits in transit but checks are outstanding by bank.