How to Do Account Reconciliation for Any GL Account

Quick Answer: Pick the outside document that proves the account (a statement, subledger or schedule), pull the general ledger balance for the same date, list every difference, investigate each one until it is either a timing item or an error, post journal entries for the errors, and have someone review and sign the finished reconciliation. The cash account follows the same five stages using the bank statement as evidence.

Every general ledger reconciliation follows one procedure, whether the account is cash, a loan or accrued payroll. You decide what proves the balance, compare it with the ledger on the same date, explain the gap, correct what is wrong and document who checked it. The details change by account; the order of work does not.

Stage 1: Which document is the source of truth?

Before opening the ledger, name the evidence. If you cannot say what would prove the balance, you cannot reconcile it.

• Cash and bank accounts: the bank statement for the period.
• Credit card liability: the issuer's statement.
• Accounts receivable and payable: the aged subledger, plus statements from large vendors.
• Loans: the lender's statement or an amortization schedule you have agreed with the lender.
• Payroll liabilities: the payroll provider's liability report and proof of tax deposits.
• Prepaids, accruals, fixed assets: a schedule you maintain, with invoices or contracts attached.
• Clearing accounts: the processor's settlement reports, or simply the expectation that the balance should be zero.

The evidence must come from outside the account being tested. A report generated from the same ledger, such as the account's own register, is not evidence; it is the thing being checked.

Stage 2: How do you compare the GL balance to the evidence?

Use the same cutoff date for both. Then set up a worksheet with this layout:

Check the opening position first. The prior period's reconciled balance should be this period's starting point on both sides. If last month's ending ledger balance has changed since you reconciled it, someone edited a closed period, and that has to be resolved before you go further. QuickBooks Desktop flags exactly this: its reconcile instructions tell you to confirm the beginning balance matches the statement before you start ticking items.

Cash account reconciliation, worked

The cash account is where most people learn this, so here is the general ledger version in numbers. At June 30 the ledger shows $42,615.20 in Operating Checking; the bank statement shows $44,980.70.

The adjusted figures are $35 apart, so the work is not done. Running the exact-amount test finds it: check #2214 was written for $1,400 (the amount on the outstanding list, and the amount that cleared on July 3) but was entered in the ledger as $1,365. The books understate that payment by $35. Correct it and both sides agree at $43,130.70.

The general ledger entries that follow are: record the fee, record the ACH receipt, and increase check #2214 to $1,400. Outstanding checks and the deposit in transit need no entry; they are timing items that should clear next month.

Stage 3: How do you investigate differences?

Most variances fall into a short list, and a fixed order of tests finds them quickly:

1. Exact match on amount. Search the ledger and the evidence for the precise difference. A single missing or duplicated transaction shows up immediately.
2. Half the difference. If the gap is $480, look for a $240 item. An amount entered with the wrong sign doubles its effect.
3. Divisible by nine. A difference evenly divisible by 9 often means transposed digits, such as $81 entered as $18.
4. Dates near the cutoff. Items dated in the last two or three days of the period, or the first days of the next, are often recorded in one period and posted by the bank in another.
5. Account misposting. Run the transaction detail for related accounts. A loan payment posted to the wrong loan leaves two accounts off by the same amount in opposite directions.
6. Changes to prior periods. Use the audit log in your software to see edits to transactions dated before the last reconciliation.

When the evidence is a long PDF statement, sorting it by amount is the fastest way to run tests 1 to 3. Some banks let you download a CSV of recent activity; when they do not, converting the statement with a tool such as QuickBankConvert gives you a spreadsheet of dated, signed amounts you can sort and filter against the ledger export.

Stage 4: What adjustments should you post?

Separate the reconciling items into two groups.

• Timing items exist only because one side recorded a real transaction before the other did. No entry is needed. Carry them forward and confirm they clear.
• Errors and omissions mean the ledger is wrong. Post a journal entry or correct the original transaction, with a memo that refers to the reconciliation.

Prefer fixing the original transaction over posting a separate adjusting entry when the error is in the current, open period; the audit trail is cleaner. For errors in a closed period, post a current-period correcting entry rather than reopening the old month, unless the amount is material enough that the prior financial statements need restating.

Never post an unexplained "reconciliation adjustment" to make the totals agree. A small plug today becomes a large unexplained balance by year end.

Stage 5: How should a reconciliation be signed off?

A reconciliation is finished when someone other than the preparer has reviewed it. The reviewer checks that:

• the evidence is attached and covers the full period;
• the ledger balance on the worksheet matches the trial balance;
• each reconciling item has a date, amount and reason;
• timing items from last month cleared;
• correcting entries were actually posted.

Both people initial and date the worksheet. Store it with the statements. The IRS recordkeeping guidance asks businesses to keep supporting records for as long as they may be needed to back up a return, and a signed reconciliation is the quickest proof that a balance was checked.

How do you reconcile many GL accounts efficiently?

For a full month-end close, list every balance sheet account with an owner, a due date and a frequency. High-activity accounts get monthly reconciliations; dormant ones can be reviewed quarterly. Use the same worksheet format for all of them so a reviewer can read any reconciliation in a minute.

Income and expense accounts are not reconciled the same way, because there is no outside balance to compare. Instead, analyze them: compare each to the prior month and to budget, and investigate large swings. The balance sheet reconciliations will already have caught most posting errors, since each error affects one account on each side.

The account-by-account schedule list is in the guide to reconciling a balance sheet, and the bank-only version with statement matching is the bank statement reconciliation guide.

Related guides

• What reconciling an account means and why it matters
• Bank statement versus books, line by line
• Supporting schedules for each balance sheet line
• Bank statement PDF to CSV