What is reconciliations?
The process of making consistent or compatible.
The act of confirming that the balance in one’s ledgers matches the corresponding statement.
There are, in general, five types of general ledger accounts that the typical business accounting system deals with: Asset, Liability, Equity, Revenue and Expense. Income Statement (Revenue and Expense) accounts eventually get closed out into an Equity account called Retained Earnings at the end of the fiscal year and their balances start over again at zero. Balance Sheet accounts (Asset, Liability & Equity), however, continue to roll their balances from period to period and year to year.
To ensure the reliability of the financial records reconciliations must, therefore, be performed for all Balance Sheet accounts on a regular and ongoing basis. A robust reconciliation process improves the accuracy of the financial reporting function and allows the Finance Department to publish financial reports with confidence.