What To Know About Account Reconciliation?

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What To Know About Account Reconciliation?
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What Is Account Reconciliation?
Accounting reconciliation ensures that figures
are accurate and agreeable by comparing two sets
of record. It also confirms that all accounts in
the general ledger are consistent, accurate, and
complete. Account reconciliation allows you to
verify the accuracy of your financial
information. Compared to other tasks, comparing
two sets of records may not seem exciting.
However, it is an essential step of the closing
process.
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Why Do We Need To Reconcile Accounts?
Even though this may seem obvious, it is
essential for the accounting records to be
accurate. Reconciling accounts is a crucial part
of the month-end close. Every month, we know that
the financial statements are accurate, or at
least materially correct. Balance sheet
reconciliation ensures that net income is
accurate. Talk to an accountant Los Angeles to
know more. Since Sarbanes-Oxley became effective
in 2006, public companies are required to
maintain internal controls that prevent material
misstatements.
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What Causes Account Reconciliation?
Timing differences. A deposit or a payment
recorded in your accounting software may not
appear on your monthly bank statement. This was a
much bigger problem when vendors and employees
were paid by paper checks. Mistakes. How many
times have you transposed digits or fat-fingered
a number? It happens to everyone. Or perhaps you
made a mistake with your account number. A
formula error may have occurred in the Excel
spreadsheet you used to calculate the journal
entry.
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How To Do Account Reconciliation?
It's best to find someone who knows the types of
transactions that go through an account, but not
the one who records them. Accounts with material
balances on the balance sheet should generally be
reconciled regularly. Using reconciliation
software, it's easy to reconcile every account
easily and quickly - and some of this can also be
automated. Reconciliation may need to be
performed every month, every week, or even every
day, depending on the volume of transactions.
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Bank Reconciliations Can Prevent Overdrafts
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