Reconciling Accounts

Compares multiple data sources to produce reconciliation reports with break identification and aging analysis.

When To Use

Proving a GL balance is complete, accurate, and valid at a point in time against a source of truth (bank statement, sub-ledger, counterparty confirmation, amortization schedule).
Surfacing and categorizing breaks (discrepancies) with aging so they are investigated, not buried.
Producing audit-ready reconciliation documentation that satisfies reviewer sign-off and SOX evidence requirements. [VERIFY: Confirm whether the entity is subject to SOX or equivalent internal control framework.]
Standardizing reconciliation across account types to reduce close cycle time.
Performing bank reconciliations, intercompany reconciliations, sub-ledger-to-GL tie-outs, or balance sheet account roll-forwards.

If you cannot reconcile an account, you cannot assert its balance is correct.

Inputs To Gather

Before any reconciliation work begins, confirm or collect the following. Do NOT proceed with incomplete intake — mark gaps as [MISSING] and escalate.

| Field | Required | Description | |---|---|---| | Reconciliation Type | Yes | One of: Bank, Intercompany, Sub-ledger to GL, Balance Sheet Account | | Account Number(s) | Yes | GL account(s) in scope. Include entity/company code if multi-entity. | | Account Name | Yes | Descriptive name (e.g., "Chase Operating Account", "IC — Entity A to B") | | Period End Date | Yes | The as-of date for the reconciliation (e.g., 2025-12-31) | | GL Balance | Yes | Ending balance per the general ledger at period end | | Supporting Source | Yes | The comparison source: bank statement, sub-ledger, counterparty balance, schedule | | Supporting Source Balance | Yes | Ending balance per the supporting source | | Currency | Yes | Functional currency. Flag if FX translation is involved. | | Materiality Threshold | Yes | Dollar amount below which differences may be written off without investigation [VERIFY: Confirm entity's materiality policy and any audit committee-approved thresholds.] | | Preparer / Reviewer | Yes | Names for evidence of segregation of duties | | Reconciliation Frequency | Yes | Daily, Monthly, Quarterly — determines expected cadence | | Prior Period Carryforward Items | If any | Unresolved items from prior reconciliation that should clear this period |

Frequency Guidelines

| Account Type | Recommended Frequency | Rationale | |---|---|---| | Cash / Bank | Daily or at minimum Monthly | High volume, fraud risk, cash management | | Intercompany | Monthly | Must net to zero at consolidation; timing differences compound | | Accounts Receivable / Payable | Monthly | Sub-ledger aging must tie to GL | | Prepaid Expenses | Monthly | Amortization schedules drive balance | | Accrued Liabilities | Monthly | Estimates require fresh support each period | | Fixed Assets / Depreciation | Monthly | Roll-forward must reconcile additions, disposals, depreciation | | Deferred Revenue | Monthly | Revenue recognition schedule drives balance | | Equity / Less Active BS | Quarterly | Low activity, but must still be formally reconciled |

Workflow

Step 1: Obtain and Validate GL Balance

Pull the trial balance or GL detail for the account at the period end date.
Confirm the balance agrees to the trial balance used for financial statement preparation.
If the GL detail is a list of transactions, foot the detail and confirm it ties to the ending balance.
Flag any post-close adjustments that may have been posted after the initial pull.

Step 2: Obtain Supporting Detail

The supporting source depends on reconciliation type:

| Recon Type | Primary Supporting Source | Secondary Sources | |---|---|---| | Bank | Bank statement (PDF or data feed) | Cleared check images, deposit slips, bank fee schedules | | Intercompany | Counterparty GL detail or confirmation | IC invoice log, netting schedule | | Sub-ledger to GL | Sub-ledger trial balance or aging | Transaction detail, module reports | | Balance Sheet Account | Supporting schedule (amortization, roll-forward, listing) | Invoices, contracts, fixed asset register |

Step 3: Standardize and Match

Normalize date formats, reference numbers, and amount signs across sources.
Perform matching on one or more keys: reference/check number, amount, date, description.
Exact matches clear automatically. Partial matches (amount match, date mismatch) require manual review.
Document the matching methodology used.

Step 4: Identify and Categorize Breaks

Every unmatched item is a reconciling item. Categorize each one:

| Category | Code | Description | Examples | |---|---|---|---| | Timing Difference | TIMING | Transaction recorded in one source but not yet in the other; expected to clear | Outstanding checks, deposits in transit, IC entries posted in different periods | | Error — Source A | ERR-A | Mistake in the GL requiring correction | Duplicate posting, wrong amount, misclassification | | Error — Source B | ERR-B | Mistake in the supporting source | Bank error, counterparty mis-posting | | Missing Entry | MISSING | Transaction exists in one source with no corresponding entry in the other | Unrecorded bank fees, interest, NSF items, unbooked IC charges | | Cut-off | CUTOFF | Transaction recorded in the wrong period | Revenue/expense recognized before or after the correct period | | FX Translation | FX | Difference caused by exchange rate variance | Remeasurement differences on foreign-currency-denominated balances | | Immaterial Write-off | WOFF | Difference within materiality threshold; no investigation required | Rounding, penny differences, small bank fees |

Step 5: Age the Reconciling Items

Every reconciling item gets an age bucket based on how long it has remained unresolved:

| Aging Bucket | Days Outstanding | Required Action | |---|---|---| | Current | 0-30 days | Monitor. Expected to clear next period. | | Aged | 31-90 days | Investigate. Document reason for delay. Escalate if no clear resolution path. | | Stale | >90 days | Mandatory investigation. Likely requires a journal entry, write-off, or management decision. Flag for controller review. |

Stale items are a red flag. If an item has sat unresolved for 90+ days, the reconciliation is not complete — it is a tracker with an open item list.

Step 6: Resolve and Document

For each reconciling item, document the resolution or proposed action:

Timing items: Note expected clearing date. If a timing item has been "timing" for >60 days, reclassify to MISSING or ERR.
Errors: Prepare a correcting journal entry (JE) with supporting detail. Include the JE number once posted.
Missing entries: Prepare the booking entry. For bank items (fees, interest), batch into a single JE if immaterial individually.
Write-offs: Document the amount, the threshold used, and approval. Write-offs should be posted as a JE, not simply ignored.

Step 7: Prove Out the Reconciliation

The reconciliation must foot and cross-foot. The standard proof:

GL Balance (per books)                         $XXX,XXX.XX
  Add: Items in supporting source, not in GL   $XX,XXX.XX
  Less: Items in GL, not in supporting source  ($X,XXX.XX)
                                               ───────────
Adjusted GL Balance                            $XXX,XXX.XX

Supporting Source Balance                      $XXX,XXX.XX
  Add: Items in GL, not in supporting source   $X,XXX.XX
  Less: Items in supporting source, not in GL  ($XX,XXX.XX)
                                               ───────────
Adjusted Supporting Source Balance              $XXX,XXX.XX

Difference                                     $0.00

If the difference is not zero, the reconciliation is not complete.

Output

Reconciliation Summary Header

ACCOUNT RECONCILIATION
Account:        [Number] — [Name]
Entity:         [Company Code / Entity Name]
Period:         [Month-End Date]
Currency:       [CCY]
Prepared by:    [Name]           Date: [Date]
Reviewed by:    [Name]           Date: [Date]
Status:         [Reconciled / Open Items Remaining]

Reconciling Items Table

See references/RECONCILIATION-TEMPLATE.md for the standardized table format.

Summary Metrics

Include at the bottom of every reconciliation:

| Metric | Value | |---|---| | GL Balance | $XXX | | Supporting Source Balance | $XXX | | Gross Reconciling Items | $XXX | | Net Reconciling Difference | $0.00 | | Count of Open Items | N | | Stale Items (>90 days) | N | | Largest Single Reconciling Item | $XXX | | Materiality Threshold | $XXX | | Items Exceeding Threshold | N |

Quality Checks

Completeness and Accuracy Verification

Before finalizing any reconciliation output, verify:

[ ] Proof: Adjusted GL balance equals adjusted supporting source balance (difference = $0.00)
[ ] Completeness: All transactions in both sources are accounted for — matched or listed as reconciling items
[ ] Categorization: Every reconciling item has a category code (TIMING, ERR-A, ERR-B, MISSING, CUTOFF, FX, WOFF)
[ ] Aging: Every reconciling item has an aging bucket and days outstanding
[ ] Action items: Every non-timing item has a proposed resolution with an owner and due date
[ ] Carryforward check: Prior period items are tracked — cleared items removed, persistent items re-aged
[ ] Materiality: Items below threshold are documented as write-offs, not silently dropped
[ ] Journal entries: All correcting/booking entries are identified with JE numbers (or marked [PENDING])
[ ] Reviewer sign-off: Reconciliation includes preparer and reviewer fields; reviewer has a basis to assess completeness
[ ] No stale items without explanation: Any item >90 days has a documented investigation note

SOX Control Considerations

[VERIFY: Confirm whether the entity is subject to SOX Section 404 or an equivalent internal control framework (e.g., CSOX, J-SOX). Adjust control evidence requirements accordingly.]

Account reconciliation is typically a key control in a SOX environment. The following must be evidenced:

| Control Attribute | What to Document | |---|---| | Timeliness | Reconciliation completed within X business days of period end (per policy) | | Completeness | All in-scope accounts reconciled; none skipped | | Accuracy | Reconciliation foots to zero or differences are explained | | Evidence of Review | Independent reviewer sign-off with date; reviewer is not the preparer | | Investigation | Stale and material items have documented follow-up | | Resolution | Correcting entries posted and referenced |

Common Deficiency Patterns

Flag these in quality review — they indicate a reconciliation that looks complete but is not:

"Timing" items that never clear — If an outstanding check has been outstanding for 6 months, it is not timing. Investigate for stale-dated checks, escheatment requirements, or recording errors. [VERIFY: Check applicable state escheatment/unclaimed property laws for stale-dated check thresholds.]
Plugged differences — A single line labeled "Other" or "Miscellaneous" that forces the recon to zero. Every reconciling item must be individually identified.
Stale support — Using a bank statement from a different date than the GL balance, or a sub-ledger run at a different time. Sources must be as-of the same point in time.
Missing prior-period roll — The reconciliation does not track items from last month. You cannot assess whether aged items are growing or shrinking.
No materiality framework — Write-offs without a stated threshold, or investigation of penny differences while ignoring a large unresolved item.

Reconciliation-Type-Specific Checks

Bank Reconciliation

Outstanding checks >180 days: check escheatment laws by jurisdiction [VERIFY: State unclaimed property statutes vary; confirm applicable dormancy periods and reporting deadlines.]
Deposits in transit >3 business days: investigate; may indicate fictitious revenue (kiting)
Bank fees/interest: confirm booked monthly; do not let accumulate
NSF / returned items: confirm AR was re-debited or follow-up initiated

Intercompany

Net IC balance across all entities must equal zero at consolidation
Bilateral confirmation: both sides agree on the balance
Timing differences must have a clear posting date on the counterparty side
Eliminate in consolidation only after both sides are reconciled

Sub-ledger to GL

Sub-ledger total must tie to GL control account exactly
If a difference exists, it usually means a journal entry was posted directly to the GL control account bypassing the sub-ledger — this is a control weakness

Balance Sheet Account (Schedule-Based)

Roll-forward: Opening balance + additions - reductions = Ending balance = GL balance
Prepaid: Amortization schedule must tie; check for fully amortized items still on the schedule
Accruals: Each accrual must have a basis (invoice, estimate, contract term); stale accruals indicate over-accrual
Fixed assets: Agree to fixed asset register; check for ghost assets

Reference Files

| File | Description | |---|---| | references/RECONCILIATION-TEMPLATE.md | Standardized reconciling items table, proof format, and summary metrics template |