What is meant by reconciling an account?
Reconciling an account often means proving or documenting that an account balance is correct. For example, we reconcile the balance in the general ledger account Cash in Checking to the balance shown on the bank statement. The objective is to report the correct amount in the general ledger account Cash in Checking. You will often need to adjust the general ledger account balance for items appearing on the bank statement that were not entered in the general ledger account.
I recall being asked to reconcile the general ledger account Freight Payable. What I needed to do was provide documentation that the balance in Freight Payable was proper. I proceeded to look at the shipments of recent sales and then determined how much we would be obligated to pay for the freight on those sales. We then adjusted the balance in Freight Payable to my documented amount. This reconciliation was done to have the correct account balance and to provide the outside auditors with documentation which could easily be reviewed.
I also reconciled the balance in Utilities Payable by computing the daily cost of each utility that the company used. The cost per day was then multiplied by the number of days since the last meter reading date shown on the utility bills already entered in our accounting system. We then adjusted the Utilities Payable account balance to be equal to the documented amount.
Learn more about Adjusting Entries and Bank Reconciliation.
Comments
10 Responses to “What is meant by reconciling an account?”
Leave a Reply
 | Free updates with your feed reader (or) receive our monthly Q&A newsletter by filling out the form below: |
Accounting Cheat Sheet
Receive our popular 15-page Cheat Sheet at no cost when
you join our free newsletter:
|
We keep your email address 100% safe and secure.
Most Recent Questions
- In a bank reconciliation, what happens to the outstanding checks of the previous month?
- Is Accounts Payable a debit or a credit or both?
- Why are loan costs amortized?
- Are repairs to office equipment and factory equipment period costs?
- Why would a company use double-declining depreciation on its financial statements?
- What is a natural business year?
- What is the difference between a ledger and a trial balance?
Questions by Category
- Debits and Credits
- Depreciation
- Financial Accounting
- Financial Ratios
- Improving Profits
- Income Statement
- Inventory and Cost of Goods Sold
- Lower of Cost or Market
- Manufacturing Overhead
- Nonmanufacturing Overhead
- Payroll Accounting
- Present Value of a Single Amount
- Present Value of an Ordinary Annuity
- Standard Costing
- Stockholders' Equity
Why AccountingCoach.com?
AccountingCoach.com is designed to help people without an accounting background easily understand accounting concepts at no cost.
By investing thousands of hours, we have created clear and concise accounting information for both business people and students of all ages.
Read 1,200+ Visitor Testimonials
I want to your handout to explian about Bank Reconcilation. how to do?
postal 479
Country Ethiopia
City Bahir-Dar
Rood Fleg hiot Hospital
Bahir-Dar
Reconciling an account means proving or documenting that an accounting is correct.
why do we use account codes
Accounts reconciliation simply means, to conmfirm that the two accounts balances are accurate.
What is the usage of expense account?
Expense account is a holding place where you keep track of where you money is going. To simplify it, let’s say you as an individual Mr. Rahul have lots of expenses each month. There’s the electric bill, the water bill, the phone bill etc. All of these are expenses to you. In other words, you’ve to pay them each month. On the other hand, let’s say you’ve one income from your job.
In order for you to meet your obligations, you have to keep track of your expenses so that you can balance your income against your expenses or you’ll be in financial difficulties.
So, if you happen to be in financial difficulties because of a mismatch between your income and expenses. You’ll definitely want to check why of this imbalance. For instance by looking at your electric bill, you realize you could cut down here if you used two hours of electricity less than you used to.
Here is where the importance of Income Statements become crystal clear. It helps companies to look at a summary of their net income or net loss and where they need to make cuts to break-even and/or perhaps to even make some profit.
I hope this sheds some light of the importance of expense accounts.
I am entering the books (for 2008) for a friend, in quickbooks, but i dont have access to his file as it is corrupt, I have to enter opeing balances from the trial balance. I have set up all the charts of accounts, vendors and customers. But it has been 20 years since I had to enter opening balances. Trial balance shows Prelim, Adjs, Reclass, RepAnnotation, and Rep 08/06 columns. I’m Brain dead, which column do I use to enter the opening balance.
Sample
Chq Account Prelim (29,873.59) Adj 0.00, reclass 0.00, RepAnno (29,873.59), Rep 08/06 1,392.92.
Hope you can help me.
Thanks
the preparation of manufacture account
Dear friends,
Accounting Coaches.
I am very much confused, which programme (accounting package) is suitable for me, Tally,Peachtree,Quickbook,DacEasy…. I have lot of tasks, I am General Manager for Electric & Electronics Co. that buys and sells different items. On the other hand, I am an employee and work for big Firm in Dubai, that has agents in the world, ( Sales and Service).
The ony thing i still in surprising is, ” every accountant or bookeepr in Dubai, asks you a question related to the accounting programme he or she uses..!!!
Hope you turn me back with your best ideas and assistance.
Regards,
Mr. Awes Ahmed Gabow
Dubai - U.A.E
wat is credit and wat is debit