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Reconciliation of Accounts is one of the important day to day activity, enables the assigned personnel to complete its job. There are lot of reasons behind the differences arise in Account Balances of various types. Although practically mismatching of Accounts are unavoidable aspect but it can be avoided through a Effective Reconciliation Process.

Let us discuss the three different aspects of Reconciliation of Accounts i.e.

1. Reasons behind the differences

2. Reconciliation Process to avoid mismatching of Account Balancing

3. Points to Remember

Reasons Behind the Differences

Here the topic is not just limited to Reconciliation of Account Balances and but also the reconciliation of all transactions whether they are suffering from Balance Mismatching or not. As we know for every management it is important that the work should be carried out through a proper mode as prescribed in procedures & policies. In order to ensure all that reconciliation is required. Such as:-

1) Whether the payment has been made / Receipt has been taken by a Authorized person.on.

2) Duties and Responsibilities are properly secreted.

3) Payments / Receipts recorded but not yet cleared / credited.

4) Wrong entry (Wrong posting is not practical now as computerized accounting software doesn't have any space for it)

5) Appropriate Approvals obtained by the management for the Payments where ever required.

6) Wrong Adjustment entry.

Effective Reconciliation Process

For every type of organization, in order to perform the reconciliation of accounts they must have to draft or opt some Process. The process must be efficient to fulfill the requirements. While drafting a process following points must be remembered:-

1) Timely Clearing of Reconciling Items.

2) Reconciliations performed on Scheduled Basis.

3) Formal Reconciliation Policy and Procedures.

4) Centralized Control, Tracking and Reporting.

5) Segregation of Duties and Responsibilities.

6) Management Oversight, Commitment and Authorizations.

7) Reconciliation Schedule Based on Risk of Account Activity.

The process must benefits the operations and will not effect the smooth working of an organization. Efforts should be made to avoid all possible deficiencies.

Points to Remember

Well we all are aware about the procedures to be followed in case reconciliation is required on part of management and operations such Inappropriate Authorizations, etc. I will share the basic tips to reconcile the Account Balances.

1) Basic Rule = Calculate difference and try to find out the equivalent entry.

2) Advance Rule = Try to find out the entry equivalent to Double the difference

3) If still the difference is unidentified than Tally all Account Balances individually. Efforts should be made to find the deficiency from the all other final account balances. If not than monthly/quarterly basis should be followed.

Reconciliation of Accounts is not just the reconcile of balances, it has a wider scope as it's process includes the part of management, procedures, policies, plans, etc. So it should be performed with intensive care.

Good Time

Rahul Gupta


Published by

Rahul Gupta
(Chartered Accountant)
Category Accounts   Report

9 Likes   109 Shares   32589 Views


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