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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.

  • sriram solai

    Nice one

  • tenny

    What are the types of reconciliation that can happen in financial domain?

  • Prashant Shegaonkar

    Hi Tenny,

    Types of reconciliations that can happen are broadly categorised into :
    1) Nostro – Reconciles cash statements sent by agent bank with internal cash ledgers.
    2) Depo – Reconciles stock statements sent by agent bank with internal stock ledgers
    3) System to System – An Internal reconciliation that is done between two ledger booking systems. This can be a Front office to Front office or Back office to Backoffice or Front Office to Back office system reconciliations.
    4) Cash Control – Reconciliation done on Control or Suspense accounts that do not hit P and L or balance sheet of the firm. This Reconciliations actually match actual cash with Theoretical cash booked Internally to nullify P and L impact.

    • Harmandeep Singh

      Thanks Prashant for picking up this!

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  • tenny

    in securities reconciliations, how mt537 file is used, in addition to mt535 and mt536.
    can you please explain.

    mt535 reports the positions and mt536 reports the trades. How mt537 file will help in securities reconciliations

  • Harmandeep Singh

    test