What to Check During a Reconciliation

What to Check for When Reconciling an Account 

Reconciling an account in bookkeeping is a critical process that ensures your financial records match the transactions on your bank statement. It's important to approach and perform with diligence to avoid discrepancies that could lead to inaccuracies in financial reporting. Before clicking "Finish" on your reconciliation screen, you should review several key points to confirm the accuracy of your work. Here is a list on what to check:

1. Check for a Zero Balance at the top of the Reconciliation Screen

The first and arguably the most obvious step is ensuring the balance at the top of the reconciliation screen registers $0. This means that all your transactions have been accounted for correctly. If there is a balance other than $0, this indicates that something has been missed or entered incorrectly. A positive or negative balance signals a discrepancy that needs attention. It's crucial to resolve these issues before completing the reconciliation process.

2. Review Transaction Categorization

Remain confident in the categorization of each transaction. Proper categorization is essential for accurate financial reporting and tax preparation. Check that income and expenses are classified under the appropriate accounts, such as sales revenue, operating expenses, or other specific categories that make sense for your business.

3. Verify Customer and Vendor Assignments

Check that each transaction has the correct customer or vendor assigned , especially for income and expense transactions. Incorrectly assigned transactions can distort your reports and potentially affect your tax filings. For general transactions like bank fees or service charges, you don't typically need to assign a vendor or customer, so focus on those that directly involve your business operations.

4. Match Deposits with Bank Statement Totals

At the top of the reconciliation screen, there will be a section showing the total deposits recorded for the period. Compare this number with the total deposits listed on your bank statement. Bank statements typically show a summary of all deposits for the particular month, so ensure that these match exactly. Any discrepancies point to missing or incorrect transactions.

5. Match Withdrawals or Expenses with Bank Statement Totals

Also, you'll need to verify that the total withdrawals or expenses listed on the reconciliation screen match the withdrawal totals on the bank statement. These can include payments made to vendors or suppliers, employee salaries, and other business related expenses. Bank statements typically provide a summary of all withdrawals, making things easier to compare and spot discrepancies. 

6. Search for Missing Transactions

Ensure that no missing transactions are missing. If you notice a deposit or withdrawal that should be included but isn't showing up on the reconciliation screen, you'll need to investigate further. Missing transactions could be a result of overlooked receipts, miscategorized items, or data entry errors. Cross-check your accounting software and bank statement to identify any gaps.

7. Search for Duplicate Transactions

Just as transactions can go missing, they can also show up twice or more. Duplicates can arise from manual errors, such as entering the same transaction multiple times. Carefully review your list of transactions and ensure each one appears only once. 

Closing

Reconciling an account is a detailed and precise process that demands attention in several key factors. By carefully checking the balance, transaction categorizations, vendor and customer assignments, deposit and withdrawal totals, and confirming that no transactions are missing or duplicated, you can ensure that your books are accurate. This process not only helps maintain financial integrity but also prepares you for tax season, audits, and financial analysis. Always take the time needed to double-check these details before hitting "Finish" on your reconciliation.