A business performs general ledger reconciliations to ensure that the account balances listed in its books are correct. Reconciliation is an essential step in keeping track of the value of the business' assets, as well as the extent of its liabilities.
The General Ledger
The general ledger is the master file of accounts that a business uses to record all transactions that affect the balance sheet and the income statement. Anything that affect's the company's assets, liabilities, income and expenses must be recorded in the general ledger. It's the responsibility of the company's bookkeeper to make sure the accounts in the ledger are accurate.
A Checkbook Example
If you've ever reconciled a bank statement, you have an idea of what's involved in general ledger reconciliation. You get your statement, and you compare the items listed on it with what you have entered in your check register. If you and the bank have been recording transactions correctly, the statement and your register should match. If they don't, you must go through and find what's missing or recorded incorrectly.
In general ledger reconciliation, you go through accounts in the ledger -- cash, receivables, payables and so on -- and reconcile them with actual records of transactions. This way, errors or omissions in the ledger can be corrected and the business can be assured that its books present an accurate picture of the company's position.