In this article, we will discuss the concept of reconciliation, how it works, and its benefits. We will also provide a set of frequently asked questions on this topic.
Definition and Examples of Reconciliation
Reconciliation is the process of comparing internal financial records with monthly data from external sources such as banks, credit card companies, or other financial institutions to verify their accuracy.
How Does Accounting Reconciliation Work?
When reconciling accounts, different accounting sources of the company are compared to check for errors and ensure their conformity.
Benefits of Accounting Reconciliation
Comparing transactions and balances is important because it helps prevent unwanted withdrawals from cash accounts, detect fraud or overspending on credit cards, explain timing differences, and uncover other negative activities such as theft or misrecording income and expenses. This prevents the company from incurring unwanted withdrawal fees, helps maintain error-free transactions, and aids in detecting inappropriate spending and issues like embezzlement before they spiral out of control. Reconciliation also assists the company’s accountant in preparing reliable and accurate financial statements.
Frequently Asked Questions (FAQs)
Can I pay someone to help me reconcile my accounts?
Yes, you can hire experts in this field such as accountants. However, if you decide to take on the task yourself, you could save a lot of money. And if your company is small and just starting out, reconciling your accounts yourself can be a valuable learning experience.
Can reconciliation help with tax recording?
While reconciliation may not suddenly result in a tax refund, the process of comparing financial records can play an important role in discovering business expenses that can be deducted from taxes.
Source: https://www.thebalancemoney.com/what-is-account-reconciliation-1293657
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