How to Reconcile a General Ledger Account

Step-by-Step Guide

1. 1

   Step 1: Find and compile relevant documents.

   In addition to the general ledger itself, you will need all of the documents tied to each transaction in the ledger.
   
   These include relevant invoices, receipts, account statements, and any other records relating to transactions or expenses.
   
   Basically, anything that was used as a source for data for the general ledger for this accounting period must be located and assembled to be readily accessible., Start by choosing an account within the general ledger to reconcile first.
   
   This can be any of the businesses many accounts, from accounts receivable to inventory to interest expense.
   
   It doesn't matter where you start because you'll have to do every account eventually.
   
   When you've chosen an account, first make sure that the starting balance for the period recorded in the general ledger matches the ending balance for the same account from the last period.
   
   This ensures that any errors detected lie in this period and not in previous periods.For example, if you chose the cash account, you would need to make sure that the ending cash balance from the last period was the same as the starting cash balance this period.
   
   Any discrepancy would mean that the cash balance was improperly reported at some point and that the business's true current amount of cash is unknown. , Go back and look at each transaction that affected this account.
   
   If proper accounting procedures were followed, each general ledger entry should have a reference to an invoice or receipt number that will make finding the documents simple.
   
   When you've found the documents, make sure that the transactions were recorded just once in each account, for the correct amount, and in the right accounts.
   
   Adjust any incorrect amounts and recalculate the total account balances accordingly.For example, in the cash account, you would make sure to check transactions where any cash was received from customers or where the company paid out cash. , Adjustments, which are usually used to comply with accrual accounting standards, and reversals, which change entries made in the previous period, can both cause accounts be imbalanced if they are not implemented properly.With adjustments, it is important to check that they were recorded under the right circumstances, for example that an adjustment accounting for services billed but not earned was actually necessary under the circumstances.For reversals, also called reversing entries, the important thing to look for is that planned reversals for the period were actually made at the right time.
   
   In other words, make sure that anything planned to be reversed was actually reversed., To the experience eye, some transactions will stand out as immediately unusual.
   
   These transactions are generally those that make balance adjustments that are usually not made.
   
   For example, a decrease to a revenue account is usually not made over the course of a regular accounting period.
   
   Keep an eye out for any of these unusual transactions and subject any you find to a high level of scrutiny., After any adjustments for misreported transactions, adjustments, or reversals, check and be sure that the sum of the transactions matches the ending account balance.If your calculated balance doesn't match the actual balance in the account, you have miscalculated something. , Use this same process again to reconcile the other accounts in the general ledger.
   
   When you've done so, you will have a completed and reconcile general ledger.
2. 2

   Step 2: Check the beginning account balance.

3. 3

   Step 3: Match each general ledger entry with its underlying transaction.

4. 4

   Step 4: Make sure adjustments and reversals were made properly.

5. 5

   Step 5: Investigate unusual transactions.

6. 6

   Step 6: Verify the ending balance of the account.

7. 7

   Step 7: Repeat for other accounts.

Detailed Guide

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