Oct 14, 2023 Author: Accounts Junction
Keeping the proper track of all the financial statements of a business is important for any business. Balance sheet is one of the important financial statements for any business.
It gives a proper view of the expenses, profits, revenues, and other financial aspects of the business. So, proper balance sheet reconciliation is important to ensure that there is accuracy in it.
Here, all the components of the balance sheets are cross-checked properly. In order to achieve accuracy, you must follow the proper balance sheet reconciliation process. You must understand the proper steps that must be followed while doing a reconciliation of the balance sheet.
What is balance sheet reconciliation?
It is the verification of the balance sheet accuracy by comparing the numbers recorded in the accounting books to the different documentation and other aspects.
What balance sheet reconciliation process to follow?
Following a proper reconciliation process can help you get accuracy in the balance sheet to achieve financial discipline.
Here are important steps to follow in balance sheet reconciliation:
Prepare the Balance Sheet
Begin by obtaining a copy of the company's balance sheet for the period you are reconciling. This serves as the starting point for your reconciliation process of the balance sheet.
Organize Accounts
Organize the balance sheet accounts into asset accounts, liability accounts, and equity accounts. This will help you focus on specific sections of the balance sheet during the reconciliation to organize the accounts properly.
Review Opening Balances
Compare the opening balances on the current balance sheet to the closing balances on the previous period's balance sheet. Ensure that these carryover balances match in the balance sheets properly.
Review Equity Accounts
Common Stock: Ensure the common stock balance matches the number of shares issued and their par value.
Retained Earnings: Verify retained earnings by reconciling the net income or loss for the period with previous financial statements.
Check for Errors and Omissions
Carefully review the balance sheet for any errors or omissions. Look for discrepancies in account balances or missing entries done in any of the accounting books.
Adjustments and Corrections
Make any necessary adjustments or corrections to the balance sheet. This will be effective to ensure it accurately reflects the financial position of the company.
Reconcile Subsidiary Ledgers
If you maintain subsidiary ledgers for certain accounts (e.g., accounts receivable, accounts payable), reconcile these ledgers with the corresponding balance sheet accounts. This will correct all the errors that might have happened.
Document Reconciliation
Document all the steps taken during the reconciliation process, including any adjustments made. Attach all the supporting documents reviewed, and reasons for changes made.
Finalize Reconciliation
Once you have resolved any discrepancies and are confident that the balance sheet is accurate, finalize the reconciliation.
Approval and Sign-off
Checking the reconciliation from the concern manage regarding compliance and accuracy. It will make sure that the balance sheet is accurate.
These are some of the steps to follow in the balance sheet reconciliation process. This will be an effective way to achieve accuracy in the balance sheet ensuring better accounting.
If you are looking for experts to manage your balance sheet reconciliation then Accounts Junction is a nice choice. Accounts Junction provides balance sheet reconciliation services for businesses.
Their team follows a systematic balance sheet reconciliation process to achieve better accuracy in it. Accounts Junction is an expert balance sheet reconciliation services agency across the globe.
