What Does Reconciliation of Accounts Mean?
What does it mean when accountants say they are reconciling accounts?
During the monthly close process, the accountant that works on your company’s financials will be reconciling accounts. These accounts include: all bank accounts, credit cards, and loans. So what does all this have to do with your business and why is it important? By reconciling accounts we are checking that all transactions within Xero or Quickbooks (“QB”) have been captured and recorded properly as money spent or received.
Doesn’t the bank feed process make sure everything is captured?
No! Even though bank feeds into QB and Xero have made it easier for us to classify your transactions, there are times when the system lets us down. Sometimes bank feeds skip a day, they classify a return to a merchant as an expense instead of money received, or sometimes they even duplicate the transactions for the day. That is why we do the reconciliation every month to make sure that everything is captured correctly.
What is the reconciliation process?
The accountant will take the number from the bank, credit card, or loan statement and put it in the accounting system to compare it to what the system has. Both QB and Xero will let us know if there is a variance. The accountant will look through the bank records or the chart of accounts in the system to identify the variances and add, change or delete accordingly. Once this is done, a report is generated that states everything is reconciled that we save to our workpapers.
When you work with Lance CPA Group you can rest assured that your money is accounted for correctly!