General Ledger Reconciliation: Policy, Process & Examples
4 stars based on
62 reviews
General ledger to sub-ledger reconciliation type with step by step instructions. In another article about reconciliations see "Bank Account Reconciliation"we reviewed in detail the purposes of accounting reconciliation statements, identified two major types of reconciliations bank reconciliation and general ledger to sub-ledger reconciliationprovided step-by-step instructions for the bank reconciliation process, and reconcile general ledger examples transactions a real life example of the bank reconciliation.
In this article, we continue explaining the reconciliation process and switch our gears to the general ledger to sub-ledger reconciliation. Reconciliation of the general reconcile general ledger examples transactions to sub-ledgers is another type we will review. The general ledger reconcile general ledger examples transactions includes all journal entries posted to accounts.
In nowadays' computerized world, the ledger is maintained in an electronic form. A sub-ledger is a detailed record of transactions for an individual account.
Usually, a sub-ledger contains detail of transactions for an account, which are summarized by day or month and the total is then posted to the general ledger.
Therefore, sub-ledgers serve as support for amounts posted to the general ledger. Sub-ledgers are presented in an electronic form as well e. For example, accounts receivable sub-ledger may contain detail for all issued invoices and cash receipts. At the end of a day, an accountant can summarize all invoices issued sales and cash receipts cash collections and post them to the general ledger in two separate journal entries.
The general ledger would not contain detail for each individual transaction. As there is always room for a human error, it is important to reconcile the general ledger balances to the sub-ledger balances on a periodic basis to spot such errors.
If there are no errors in posting journal entries to the general ledger, then the two balances will match; however, if there are differences, then there would be reconciling items, which need to be analyzed reconcile general ledger examples transactions corrected, if necessary. Two important accounts that should be reconciled on a monthly basis are accounts receivable and accounts payable.
Sometimes items amounts are included into a sub-ledger, but not in the ledger. Vice versa, items amounts may be posted to the ledger via a journal entry, but not recorded in the sub-ledger. Such items should be identified on the reconciliation separately to ensure they are given proper treatment. Let's now take a look at a four step approach for an accounts receivable reconciliation and an accounts payable reconciliation.
While doing that, pay special attention to the transactions that are unusual in their nature. For instance, non-recurring transactions may have a higher risk of an error than transactions completed on recurring and regular basis. You should examine the sales journal for receivables and the purchases journal for payables ; have a look at posted entries, which were posted to the wrong account, transactions posted twice duplication errortransposition errors, etc.
Then you should reconcile general ledger examples transactions at the cash receipts and cash payments journals for receivables and payables, respectively. Possibly, you will need reconcile general ledger examples transactions repeat with your examination of the invoice register for accounts receivable and the purchase order journal for accounts payable.
Reasons for the difference can include the following:. Illustration 2 shows where an adjustment is needed depending on the reasons for a difference. A credit balance on the suppliers ledger has been set off against a customer's ledger debit balance. To identify what needs to be adjusted, you could use the template of the general ledger to sub-ledger reconciliation statement presented above. If reconciling items are resolved, the reconciliation process is completed.
If there is a difference, continue to reconcile general ledger examples transactions the sub-ledger and journals that are a part of the revenue and expenditure cycles to identify the problem and correct it. How to prepare general ledger to sub-ledger reconciliation.
September 9, General ledger to sub-ledger reconciliation type with step by step instructions. Nature of general ledger to sub-ledger account reconciliation In another article about reconciliations see "Bank Account Reconciliation"we reviewed in detail the purposes of accounting reconciliation statements, identified two major types of reconciliations bank reconciliation and general ledger to sub-ledger reconciliationprovided step-by-step instructions for the bank reconciliation process, and showed a real life example of the bank reconciliation.
Step by step instructions for general ledger to sub-ledger reconciliation Reconciliation of the general ledger to sub-ledgers is another type we will review. Nature of general ledger to sub-ledger account reconciliation 2.
Real-life example of accounts receivable reconciliation. Download free accounting study notes by signing up for our free newsletter example:. Browser does not support frames! Difference between general ledger and sub-ledger.
