How to Reconcile a General Ledger Account. Every month if not sooner every general ledger account should be reconciled. Reconciled is another word for balanced. This means that the debit entry must equal the credit entry. It is important to reconcile the general ledger in order to be sure that your financial statements are correct. Read on to learn how to reconcile a general ledger account.
Items you will need
- General ledger
- Bank account records
- Other financial records
Examine each entry. Every day businesses make transactions. They may be items that they have sold, things they have bought or a combination of the two. An example of a general ledger entry is buying office equipment for cash. You would debit the office equipment account and credit cash.
Make sure there aren't any data entry errors or discrepancies in the accounts.
Research the data entry errors or/and discrepancies if there any.
Write a report. After exploring the data entry errors and/or discrepancies, write a report documenting what you have found. You will not want to make changes in the accounts until your supervisors give permission to proceed.
Correct the entries. When you make corrections in a general ledger, you don't change the original entries--you need to make correction entries. Depending on which entry you have to correct you would need to debit or credit the original entry and debit or credit the correct entry. For example, if the cash you paid for the office equipment was $250 but the original entry had $205, you would debit "account error" $45 and credit cash $45.
Create financial statements. All the entries in the general ledger will be transferred to the financial statement's balance sheet, income statement and statement of cash flow. Therefore, you must reconcile the general ledger account on a regular basis so your financial statements reflect a true picture.
Never correct original entries, unless that is your company's policy. Don't wait until the financial statements need to be created to reconcile the general ledger--do it regularly.