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Account Reconciliation and analysis - Canest

Canest > Account Reconciliation and analysis

Overview

Account reconciliations is the process of ensuring financial statement account balances are correct at the end of an accounting period.  It’s a process that uses two sets of records to ensure figures are correct and in agreement.  And if they are not in agreement, making necessary adjustments or identifying and explaining differences.

Account Reconciliations
  • Account reconciliations are typically performed after the close of a financial period.  Accountants review each account in the financial statements and verify that the balance listed is accurate.  This often involves comparing the financial statement balance to another source of information – for example comparing the balance for the Cash account to an external bank statement.  Other examples of critical accounts that require reconciliation include:

    • Cash and investments – comparing to external bank and investment accounts
    • Accounts Receivable – comparing to the AR sub-ledger
    • Accounts Payable – comparing to the AP sub-ledger
    • Prepaid Expenses – listing the components of the account balance
    • Accrued Liabilities – listing the components of the account balance
    • Intercompany Payables and Receivables – ensuring they eliminate during consolidation
    • Fixed Assets – listing the components or tying out to a sub-ledger

    The main reason for performing account reconciliations is to ensure consistency and accuracy in financial reporting.  Account reconciliations are especially important and are a key internal control for publicly-held companies that need to report financial results to external stakeholders, with detailed audit trails available to back-up all account balances.     

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