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Unformatted text preview: Balance Sheet Account
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
Account number starts with a 2 (i.e. 2XXXXX)
Represents the amount owed by the University to an
outside Clearing Accounts –
Clearing 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.
differences Reconciling an Asset or Liability
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.
schedule Step 3 - Obtain detail activity per general ledger since
account was last reconciled.
account Step 4 - Obtain detail activity per department schedules
since account was last reconciled.
since Step 5 - Compare the two records and find the items
which cause the difference between them. These are
called reconciling items.
called Step 6 - Research the adjusting items and take the
necessary action (s).
necessary Step 7 - Have the reconciliation approved. Step 1
Step Obtain the balance per the General
Ledger Obtain the
General Ledger. Go to
Click on reports. Enter your User
ID and Password. Click on General
Ledger under Core Reports. Select the period
Note: Do NOT
choose a fund
account, this is
Keeping the fund
field blank will
allow you to spot
activity in the
account. For our example,
we will say the
$10,000 Step 2 Obtain the balance per department
schedule. Balance Per Schedule
Balance 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
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.
each For our example,
the balance per
$9,000. The balance in
Ledger does not
balance of the
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
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
Go To Financial
Link. Click on reports. Enter your User
ID and Password. Click on
Reports. Enter the dates
as well as the
number. In our
completed. Here is the
data for this
account for the
January. Tip: Many
this report as
an excel file in
order to easily
use the data. Click on
transfer file Click Save.
Then save the
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
or do not have supporting documentation
as 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,
did not have
$500) that was
those two items
are needed to
ledger had one
that was not on
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
but it is not in
It will probably
be in the
ledger, once the
recorded it. No
further action is
needed at his
this item must
month. Item 2 - $500
have updated the
have not yet
A journal entry
will be necessary
to credit the
revenue account. Item 3 - $1,500
did not record
invoice #5858 in
their schedules to
show that invoice
#5858 has been
A journal to the
General Ledger is
since the General
Ledger is correct. Reconciling a Clearing Account
Reconciling 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.
“clearing” All differences at the end of the month should be
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.
indicates Step 7
Step 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
The same person cannot both perform the
reconciliation and approve it.
reconciliation 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?
received 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 Answering yes to any of the above questions indicates a
journal entry might be needed. Frequently Asked Questions
Frequently Q. How often must reconciliations be sent to the accounting
A. Reconciliations must be sent to the accounting department each
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.
monthly, Frequently Asked Questions (cont.)
Frequently 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
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.)
Frequently 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?
Questions? Edna Mendivil x44927 Marlene Trivino x48514 ...
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- Spring '10