What reconciling is not?
Reconciling is not highlighting and then presenting colored documents as the final outcome.
Time to get started?
The process of reconciling allows us to identify posting errors, exceptions, minimize liability and identify theft or loss in a timely manner.
When we reconcile we acknowledge we have some idea what is happening on our books.
Reconciliation has to occur between the organization’s books and an external document.
Some process of elimination happens during the reconciliation process as data is verified between the books and the external document.
Example while reviewing deposits if an employee is falsifying deposits, the reconciliation process should help the preparer identify this error only if he/she take the extra step to investigate why the books reflect the deposit but the bank does not acknowledge receipt of the deposit.
When reconciling it’s important to understand timing could be an issue.
The same applies with checks or any other transaction, as a part of the reconciliation process, if the preparer takes the extra step to research what may appear as discrepancies, this allows the opportunity to resolve mis-posting or a fraudulent activity.
Reconciling is a means of recognizing what is happening on a set of books in a given period.
Reconciling creates a summary of outstanding transactions or findings that must be resolved on a timely basis.
The reconciliation process is not complete if the reconciliation does not make sense or it does not zero.
The reconciliation process must include the following:
- Identifying deposits and checks in transit?
Amounts already received and posted by the company into the DMS system, but are not yet recorded by the bank. For example, a retail store deposits its cash receipts of May 31 into the bank’s night depository at 7:00 p.m. on May 31. The bank will process this deposit on the morning of June 1st. As of May 31st (the bank statement date) this is a deposit in transit.
- Adjust the balance per books
The second step of the bank reconciliation is to adjust the balance in the company’s Cash account so that it is the true, adjusted, or corrected balance. Examples of the items involved are shown in the following schedule:
- Time to compare the adjusted Balances
After adjusting the balance per bank (Step 1) and after adjusting the balance per books (Step 2), the two adjusted amounts should equal. If they do not, repeat the process, look for posting errors until the balances are identical. The balances should be the true, correct amount of cash as of the date of the bank reconciliation.
“They call it coaching but it is teaching. You do not just tell them…you show them the reasons.”