Balance Sheet Access Powerpoint

Balance Sheet Access Powerpoint - Balance Sheet Account...

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Unformatted text preview: Balance Sheet Account Reconciliation Tutorial. Reconciliation Reconciliation Reconciliation Definition: 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, Types of Balance Sheet Accounts Types Asset Accounts – Asset Liability Accounts – Liability Account number starts with a 1 (i.e. 1XXXXX) Represents the amount owed to the University by an Represents outside party. outside Account number starts with a 2 (i.e. 2XXXXX) Represents the amount owed by the University to an Represents outside party. outside Clearing Accounts – Clearing Is a special type of liability account (2190xx). General Ledger includes bank activity. Amount in account should zero each month, Amount differences should be from items in transit. differences Reconciling an Asset or Liability Account 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 If schedule do not equal, go to step 3. schedule Step 3 - Obtain detail activity per general ledger since Step account was last reconciled. account Step 4 - Obtain detail activity per department schedules Step since account was last reconciled. since Step 5 - Compare the two records and find the items Step which cause the difference between them. These are called reconciling items. called Step 6 - Research the adjusting items and take the Step necessary action (s). necessary Step 7 - Have the reconciliation approved. Step 1 Step Obtain the balance per the General Obtain Ledger 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 Obtain schedule. schedule. Balance per department schedule. Balance Per Schedule Balance The term “schedule” refers to a set of records The maintained by the department which details what the balance should be in an account. It can be from a sub-system. For Example, a It department may have their own accounting system to record transactions. record It can be a separate worksheet saved as a computer It file. For Example, a department may save a listing of all receivables in a excel file. all It can be a handwritten journal or log. For Example, It a department may record key deposits in a journal for each set of keys they distribute. each 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 Reconciling 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 Step Obtain detail activity per general ledger Obtain since account was last reconciled. since 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 Step Obtain detail activity per department Obtain schedules since account was last reconciled. Schedules will vary by department. Step 5 Step Compare the two records and find the Compare items which cause the difference between them. These are called reconciling items. them. Comments on any items that do not match Comments or do not have supporting documentation as backup. as Obtain reconciliation approval by Obtain management. management. Must include date of item for aging Must purposes. 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 department’s 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 Step Research the adjusting items and take the Research necessary action (s). necessary 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 department’s 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 Reconciling Clearing Accounts are a special type of Liability Clearing Account. The account is not meant to hold items for several months, items are constantly “clearing” out of the account. “clearing” All differences at the end of the month should be All timing differences. Generally, any item will “clear” or can be matched Generally, against an offsetting debit or credit within a week. against Any item which does not clear within a week or two, Any indicates a problem which requires resolution. indicates Step 7 Step Have the reconciliation approved. Once the reconciliation has been completed, Once it should be reviewed/approved. Typically the supervisor of the person reconciling the account will be the person reviewing the reconciliation. reconciliation. The same person cannot both perform the The reconciliation and approve it. reconciliation Approver Checklist of Asset Accounts Accounts Asset accounts start with a 1 (1XXXXX). Does the account have a credit balance (asset Does accounts should have a debit balance)? accounts Is the University owed additional money not listed in Is the asset account? the Does the reconciliation list items that will not be Does received by the University? received Answering yes to any of the above questions indicates a Answering journal entry might be needed. Approver Checklist of Liability Accounts Accounts Liability accounts start with a 2 (2XXXXX). Does the account have a debit balance (Liability Does accounts should have a credit balance)? accounts Does the University owe additional money not listed in Does the liability account? the Does the reconciliation show items no longer owed by Does the University? the Answering yes to any of the above questions indicates a Answering journal entry might be needed. Frequently Asked Questions Frequently Q. How often must reconciliations be sent to the accounting Q. department? department? A. Reconciliations must be sent to the accounting department each A. quarter. September, December, March, May, and June Preliminary. September, Q. So my department must do four reconciliations each year? Q. 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. monthly, Frequently Asked Questions (cont.) Frequently Q. Who should do the reconciliation? A. This varies from department to department. The A. 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. reconciliation. Q. The worksheet I receive each quarter listing the Q. accounts and owners is incorrect or incomplete. A. Please email BALSHEETACCTS@UCSD.EDU with BALSHEETACCTS@UCSD.EDU 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 Q. reconciliation, but the account has a zero balance and there is nothing to reconcile. there A. A certification should still be sent to the accounting A. office stating the account has the correct balance, in this case, zero. Frequently Asked Questions (cont.) Frequently Q. The account I am being asked to reconcile will not be used Q. again, and has a zero balance. again, A. Please email BALSHEETACCTS@UCSD.EDU and we will A. BALSHEETACCTS@UCSD.EDU 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. A. The person who does the reconciliation; and the person that approves the reconciliation. One person cannot both prepare and approve the reconciliation. approve Q. Our account is much more difficult than the example in this Q. tutorial. We could use additional help. A. General Accounting offers training on Balance Sheet Account Reconciliation upon request. Questions? Questions? Edna Mendivil x44927 Marlene Trivino x48514 ...
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