Record to report / R2R – Reconciliations

General

Our last post was an introduction to a simple reconciliation process.

http://faoblog.com/processes-record-report-r2r-reconciliations-general-2/

Like we mentioned, the first step to note here is “which is the balance you are starting” with. In a bank reconciliation, you could start with the balance given by the bank and arrive at the balance of the same account in your (or your client / principal’s books), or you could start with your balance an reach the bank’s balance.

Next, identify all items of difference. Sometimes, you may not get all. Important to note here is that you are not trying to link the difference to the sum or otherwise of these items.

Next, for each item determine the effect it has on the target balance. This will be easier to understand by an example or  a set of examples:

  • You start with your book balance and you have issued a check / cheque, which has not been presented at the bank. So technically, you would have reduced your balance, but the bank balance will be higher. So, you will need to add this amount to your book balance in the reconciliation to arrive at the balance shown by the bank.
  • The bank has deposited (or credited) interest in your account. So the bank balance will be higher, here again, if you have to reconcile, you will need to add the amount to your book balance to reach the bank balance.

That looks simple, doesn’t it? No confusions of debits and credits…

Have a fun weekend…

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