Balance Sheet Account

Reconciliation Tutorial.

Reconciliation
Definition:

The process of analyzing two related records and, if

differences exist between them, finding the cause and

bringing the two records into agreement. Balance

sheets accounts reconciliations are one of the
oldest and most important accounting processes
that helps ensure the accuracy, completeness of
transactions and proper segregation of duties. A
critical element of the reconciliation is to resolve
differences; differences should be identified,
investigated, explained and a corrective action
must be taken.

Types of Balance Sheet Accounts

Asset Accounts

Liability Accounts

Account number starts with a 1 (i.e. 1XXXXX)

Represents the amount owed to the University by an
outside party.
Account number starts with a 2 (i.e. 2XXXXX)
Represents the amount owed by the University to an
outside party.

Clearing Accounts

Is a special type of liability account (2190xx).

General Ledger includes bank activity.
Amount in account should zero each month,
differences should be from items in transit.

Reconciling an Asset or Liability

Account
Step 1 - Obtain the balance per the General Ledger
Step 2 - Obtain the balance per department schedule.
If the balance per the General Ledger and the department
schedule do not equal, go to step 3.
Step 3 - Obtain detail activity per general ledger since
account was last reconciled.
Step 4 - Obtain detail activity per department schedules
since account was last reconciled.
Step 5 - Compare the two records and find the items
which cause the difference between them. These are
called reconciling items.
Step 6 - Research the adjusting items and take the
necessary action (s).
Step 7 - Have the reconciliation approved.

Step 1
Obtain the balance per the General

Ledger

Obtain the
balance
per the
General Ledger.

Go to
Financial Link.
Click on reports.

Enter your User

ID and Password.

Click on General
Ledger under

Core Reports.

Select the period

and account
number.
Note: Do NOT
choose a fund
number unless
several funds
share this
account, this is
not usual.
Keeping the fund
field blank will
allow you to spot
any unauthorized
activity in the
account.

For our example,

we will say the
General Ledger
balance equals
$10,000

Step 2
Obtain the balance per department

schedule.

Balance
per department
schedule.

Balance Per Schedule

The term schedule refers to a set of records

maintained by the department which details what
the balance should be in an account.

It can be from a sub-system. For Example, a

department may have their own accounting system to
record transactions.
It can be a separate worksheet saved as a computer
file. For Example, a department may save a listing of
all receivables in a excel file.
It can be a handwritten journal or log. For Example,
a department may record key deposits in a journal for
each set of keys they distribute.

For our example,

the balance per
schedule is
$9,000.

The balance in
the General
Ledger does not
match the
balance of the
schedule. The
two balances
must
be reconciled
or brought into
agreement.

Reconciling Accounts

We must obtain all the activity in these two records since they
were last reconciled and compare them to find where the
difference occurs.
If the account was reconciled last month, then only the activity
in the last month must be reconciled.
If the account has not been reconciled recently, the
reconciliation process will be longer and harder to complete.
Reconciliations are much easier to do, and differences are
easier to resolve if they are done monthly. Doing
reconciliations monthly will save time and effort.
Investigate identified differences and take corrective action to
resolve differences.

Step 3
Obtain detail activity per general ledger

since account was last reconciled.

To obtain detail
records,
Go To Financial
Link.

Click on reports.

Enter your User

ID and Password.

Click on
General
Ledger
transactions
under Detail
Reports.

Enter the dates

since the
account was
last reconciled,
as well as the
account
number. In our
example, the
month of
January has
not been
completed.

Here is the
data for this
account for the
month of
January.

Tip: Many
people save
this report as
an excel file in
order to easily
use the data.

Click on
transfer file

Click Save.
Then save the
resulting excel
file to a
location of your
choosing.

Step 4
Obtain detail activity per department

schedules since account was last

reconciled.

Schedules will vary by department.

Step 5
Compare the two records

and find the

items which cause the difference between
them. These are called reconciling items.
Comments on any items that do not match
or do not have supporting documentation
as backup.
Obtain reconciliation approval by
management.
Must include date of item for aging
purposes.

It will likely be necessary to make changes in format of the schedules to make

comparison easier. The downloaded example General Ledger has been altered
so it can be easily compared to the example department schedule .

The two schedules are compared to each other. The items on the
General Ledger are matched against the items on the schedule. The
remaining items are reconciling items. They are needed to make the
schedules agree or reconcile. There are three reconciling items.

In our example,
the General
Ledger detail
did not have
two items
($2,000 and
$500) that was
on the
departments
schedule, so
those two items
are needed to
adjust the
general ledger.
The general
ledger had one
item ($1,500)
that was not on
the schedule,
therefore the
schedule should
be adjusted
for that item.

The amount out

of balance is
zero. We are
now ready for
the next step.

Step 6
Research the adjusting items and take the

necessary action (s).

Item 1 - $2,000
This probably a
timing
difference. The
department has
recorded
receiving a
payment on
January 31st,
but it is not in
the January
General Ledger.
It will probably
be in the
February
ledger, once the
cashier has
recorded it. No
further action is
needed at his
time. However,
this item must
clear next
month.

Item 2 - $500
The department
has determined
that receivable
#2222 is
uncollectible per
University
guidelines. They
have updated the
departmental
schedule, but
have not yet
updated the
General Ledger.
A journal entry
will be necessary
to credit the
account
receivable, and
debit the
departments
revenue account.

Item 3 - $1,500
The department
did not record
payment of
invoice #5858 in
their system.
The department
should update
their schedules to
show that invoice
#5858 has been
paid.
A journal to the
General Ledger is
not necessary
since the General
Ledger is correct.

Reconciling a Clearing Account

Clearing Accounts are a special type of Liability

Account. The account is not meant to hold items
for several months, items are constantly
clearing out of the account.

All differences at the end of the month should be

timing differences.
Generally, any item will clear or can be matched
against an offsetting debit or credit within a week.
Any item which does not clear within a week or two,
indicates a problem which requires resolution.

Step 7
Have the reconciliation approved.

Once the reconciliation has been completed,

it should be reviewed/approved. Typically the
supervisor of the person reconciling the
account will be the person reviewing the
reconciliation.
The same person cannot both perform the
reconciliation and approve it.

Approver Checklist of Asset

Accounts

Asset accounts start with a 1 (1XXXXX).

Does the account have a credit balance (asset

accounts should have a debit balance)?
Is the University owed additional money not listed in
the asset account?
Does the reconciliation list items that will not be
received by the University?

Answering yes to any of the above questions indicates a

journal entry might be needed.

Approver Checklist of Liability

Accounts

Liability accounts start with a 2 (2XXXXX).

Does the account have a debit balance (Liability

accounts should have a credit balance)?
Does the University owe additional money not listed in
the liability account?
Does the reconciliation show items no longer owed by
the University?

Answering yes to any of the above questions indicates a

journal entry might be needed.

Frequently Asked Questions

Q. How often must reconciliations be sent to the accounting

department?
A. Reconciliations must be sent to the accounting department each
quarter.
September, December, March, May, and June Preliminary.
Q. So my department must do four reconciliations each year?
A. A reconciliation should be done each month. The accounting
department will request and track the quarterly reconciliations. The
results will be given to the Vice Chancellors. Reconciliations should
be performed on a timely basis, usually this is monthly.
Reconciliations that are not performed timely are harder to
reconcile, and many outstanding items can be easily solved if done
monthly, as opposed to correcting them months later.

Frequently Asked Questions (cont.)

Q. Who should do the reconciliation?

A. This varies from department to department. The
person responsible for updating the General Ledger (and/or
keeping the department schedule up to date) should NOT
be the same person performing the reconciliation.
Q. The worksheet I receive each quarter listing the
accounts and owners is incorrect or incomplete.
A. Please email BALSHEETACCTS@UCSD.EDU with the
needed corrections. Please correct the worksheet and
send it back, with corrections highlighted in yellow.
Q. I receive the worksheet each quarter asking for a
reconciliation, but the account has a zero balance and there
is nothing to reconcile.
A. A certification should still be sent to the accounting office
stating the account has the correct balance, in this case,
zero.

Frequently Asked Questions (cont.)

Q. The account I am being asked to reconcile will not be used

again, and has a zero balance.
A. Please email BALSHEETACCTS@UCSD.EDU and we will
inactivate the account. Once the account has been inactivated, you
will no longer be asked to provide reconciliation.
Q. Why does each account have a Preparer, and Owner field?
A. Each reconciliation must be signed off by two different people.
The person who does the reconciliation; and the person that
approves the reconciliation. One person cannot both prepare and
approve the reconciliation.
Q. Our account is much more difficult than the example in this
tutorial. We could use additional help.
A. General Accounting offers training on Balance Sheet Account
Reconciliation upon request.

Questions?
Edna Mendivil
x44927
Marlene Trivino
x48514