General Ledger to Sub-Ledger Reconciliation

by Marquis Codjia; Updated September 26, 2017

An organization relies on general and subsidiary, or sub, ledgers to ensure prompt data recording, accurate financial reviews and timely publications of performance data. Bookkeepers work under the tutelage of senior accountants to reconcile financial accounts in ledgers, verifying that ledger information is complete, correct and in line with regulatory guidelines.

Ledgers

A general ledger is a financial form that contains all accounts an organization uses to record transactions. A general ledger may have one or more sub ledgers.

Reconciliation

An accountant performs a general ledger to sub ledger reconciliation to check that general ledger information is complete and accurate. The idea is to comb through the underlying data -- typically in sub ledgers -- to spot potential accounting errors or mathematical inaccuracies. A proper reconciliation helps a company produce accurate financial statements.

Personnel Involvement

To perform interledger reconciliations, bookkeepers work under the guidance of accountants -- who, in turn, submit their work to financial managers for final review. After thorough examination, managers work with corporate controllers to prepare correct performance data summaries.

Example

You’re an intern in a company’s accounting department. Your boss, the corporate controller, wants to send senior leadership relevant data for strategic decision-making. The controller asks that you reconcile the company’s customer receivables ledger with the sub ledgers of three customer accounts -- customer A, customer B and customer C. The yearend general ledger’s balance is $1 million. You delve into the corporate journal and find the following data: beginning balance of the customer receivables account $1.1 million; customer A’s balance at Jan. 1, $100,000, payments received $75,000, the client filed for bankruptcy in July; customer B’s starting receivable $500,000, purchases of $100,000, all of which were on a cash-on-delivery (COD) basis; customer C’s beginning balance $500,000, no transaction during the year, account under review but no write-off decision made as of year-end. Your goal is to work through all sub ledger data to arrive at the general ledger’s amount of $1 million. In one column, list and add up all items that increase the customer receivables account. The only incremental item is the $100,000 order the business received from customer B. In another column, indicate items that decrease the customer receivables account. These include received payments amounting to $175,000 -- or $75,000 plus the $100,000 from customer B’s COD purchase -- and customer A’s account write-off of $25,000, or $100,000 minus $75,000. As a result, remittances and deductions amount to $200,000, or $175,000 plus $25,000. To get the $1 million year-end balance, add the beginning balance of $1.1 million to the $100,000 COD transaction and subtract the $200,000 coming from remittances and deductions.

About the Author

Marquis Codjia is a New York-based freelance writer, investor and banker. He has authored articles since 2000, covering topics such as politics, technology and business. A certified public accountant and certified financial manager, Codjia received a Master of Business Administration from Rutgers University, majoring in investment analysis and financial management.