Reconciling Accounts

Reconciling Accounts

Compares multiple data sources to produce reconciliation reports with break identification and aging analysis.

When To Use

• Proving a GL balance is complete, accurate, and valid at a point in time against a source of truth (bank statement, sub-ledger, counterparty confirmation, amortization schedule).
• Surfacing and categorizing breaks (discrepancies) with aging so they are investigated, not buried.
• Producing audit-ready reconciliation documentation that satisfies reviewer sign-off and SOX evidence requirements. [VERIFY: Confirm whether the entity is subject to SOX or equivalent internal control framework.]
• Standardizing reconciliation across account types to reduce close cycle time.
• Performing bank reconciliations, intercompany reconciliations, sub-ledger-to-GL tie-outs, or balance sheet account roll-forwards.

If you cannot reconcile an account, you cannot assert its balance is correct.

Inputs To Gather

Before any reconciliation work begins, confirm or collect the following. Do NOT proceed with incomplete intake — mark gaps as [MISSING] and escalate.

Frequency Guidelines

Workflow

Step 1: Obtain and Validate GL Balance

• Pull the trial balance or GL detail for the account at the period end date.
• Confirm the balance agrees to the trial balance used for financial statement preparation.
• If the GL detail is a list of transactions, foot the detail and confirm it ties to the ending balance.
• Flag any post-close adjustments that may have been posted after the initial pull.

Step 2: Obtain Supporting Detail

The supporting source depends on reconciliation type:

Step 3: Standardize and Match

• Normalize date formats, reference numbers, and amount signs across sources.
• Perform matching on one or more keys: reference/check number, amount, date, description.
• Exact matches clear automatically. Partial matches (amount match, date mismatch) require manual review.
• Document the matching methodology used.

Step 4: Identify and Categorize Breaks

Every unmatched item is a reconciling item. Categorize each one:

Step 5: Age the Reconciling Items

Every reconciling item gets an age bucket based on how long it has remained unresolved:

Stale items are a red flag. If an item has sat unresolved for 90+ days, the reconciliation is not complete — it is a tracker with an open item list.

Step 6: Resolve and Document

For each reconciling item, document the resolution or proposed action:

• Timing items: Note expected clearing date. If a timing item has been "timing" for >60 days, reclassify to MISSING or ERR.
• Errors: Prepare a correcting journal entry (JE) with supporting detail. Include the JE number once posted.
• Missing entries: Prepare the booking entry. For bank items (fees, interest), batch into a single JE if immaterial individually.
• Write-offs: Document the amount, the threshold used, and approval. Write-offs should be posted as a JE, not simply ignored.

Step 7: Prove Out the Reconciliation

The reconciliation must foot and cross-foot. The standard proof:

GL Balance (per books)                         $XXX,XXX.XX
  Add: Items in supporting source, not in GL   $XX,XXX.XX
  Less: Items in GL, not in supporting source  ($X,XXX.XX)
                                               ───────────
Adjusted GL Balance                            $XXX,XXX.XX

Supporting Source Balance                      $XXX,XXX.XX
  Add: Items in GL, not in supporting source   $X,XXX.XX
  Less: Items in supporting source, not in GL  ($XX,XXX.XX)
                                               ───────────
Adjusted Supporting Source Balance              $XXX,XXX.XX

Difference                                     $0.00

If the difference is not zero, the reconciliation is not complete.

Output

Reconciliation Summary Header

ACCOUNT RECONCILIATION
Account:        [Number] — [Name]
Entity:         [Company Code / Entity Name]
Period:         [Month-End Date]
Currency:       [CCY]
Prepared by:    [Name]           Date: [Date]
Reviewed by:    [Name]           Date: [Date]
Status:         [Reconciled / Open Items Remaining]

Reconciling Items Table

See references/RECONCILIATION-TEMPLATE.md for the standardized table format.

Summary Metrics

Include at the bottom of every reconciliation:

Quality Checks

Completeness and Accuracy Verification

Before finalizing any reconciliation output, verify:

• Proof: Adjusted GL balance equals adjusted supporting source balance (difference = $0.00)
• Completeness: All transactions in both sources are accounted for — matched or listed as reconciling items
• Categorization: Every reconciling item has a category code (TIMING, ERR-A, ERR-B, MISSING, CUTOFF, FX, WOFF)
• Aging: Every reconciling item has an aging bucket and days outstanding
• Action items: Every non-timing item has a proposed resolution with an owner and due date
• Carryforward check: Prior period items are tracked — cleared items removed, persistent items re-aged
• Materiality: Items below threshold are documented as write-offs, not silently dropped
• Journal entries: All correcting/booking entries are identified with JE numbers (or marked [PENDING])
• Reviewer sign-off: Reconciliation includes preparer and reviewer fields; reviewer has a basis to assess completeness
• No stale items without explanation: Any item >90 days has a documented investigation note

SOX Control Considerations

[VERIFY: Confirm whether the entity is subject to SOX Section 404 or an equivalent internal control framework (e.g., CSOX, J-SOX). Adjust control evidence requirements accordingly.]

Account reconciliation is typically a key control in a SOX environment. The following must be evidenced:

Common Deficiency Patterns

Flag these in quality review — they indicate a reconciliation that looks complete but is not:

1. "Timing" items that never clear — If an outstanding check has been outstanding for 6 months, it is not timing. Investigate for stale-dated checks, escheatment requirements, or recording errors. [VERIFY: Check applicable state escheatment/unclaimed property laws for stale-dated check thresholds.]
2. Plugged differences — A single line labeled "Other" or "Miscellaneous" that forces the recon to zero. Every reconciling item must be individually identified.
3. Stale support — Using a bank statement from a different date than the GL balance, or a sub-ledger run at a different time. Sources must be as-of the same point in time.
4. Missing prior-period roll — The reconciliation does not track items from last month. You cannot assess whether aged items are growing or shrinking.
5. No materiality framework — Write-offs without a stated threshold, or investigation of penny differences while ignoring a large unresolved item.

Reconciliation-Type-Specific Checks

Bank Reconciliation

• Outstanding checks >180 days: check escheatment laws by jurisdiction [VERIFY: State unclaimed property statutes vary; confirm applicable dormancy periods and reporting deadlines.]
• Deposits in transit >3 business days: investigate; may indicate fictitious revenue (kiting)
• Bank fees/interest: confirm booked monthly; do not let accumulate
• NSF / returned items: confirm AR was re-debited or follow-up initiated

Intercompany

• Net IC balance across all entities must equal zero at consolidation
• Bilateral confirmation: both sides agree on the balance
• Timing differences must have a clear posting date on the counterparty side
• Eliminate in consolidation only after both sides are reconciled

Sub-ledger to GL

• Sub-ledger total must tie to GL control account exactly
• If a difference exists, it usually means a journal entry was posted directly to the GL control account bypassing the sub-ledger — this is a control weakness

Balance Sheet Account (Schedule-Based)

• Roll-forward: Opening balance + additions - reductions = Ending balance = GL balance
• Prepaid: Amortization schedule must tie; check for fully amortized items still on the schedule
• Accruals: Each accrual must have a basis (invoice, estimate, contract term); stale accruals indicate over-accrual
• Fixed assets: Agree to fixed asset register; check for ghost assets

Reference Files