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In balance sheet reconciliation, you compare the general ledger trial balance of the account to another source. The other source could be internal (such a sub-ledger) or external (such as a bank statement). Differences resulting from transaction timing (such as outstanding checks) are labeled as reconciling items.
When you reconcile an account on a balance sheet, you utilize several different detail ledgers. Cash accounts are generally reconciled against bank statements, and accounts payable and accounts receivable are usually reconciled against aging schedules. Both fixed assets and inventories are reconciled against physical counts.
When starting a balance sheet reconciliation, it is important to note reconciling items under the corresponding balances and then label them. The trial balance should be above the column. The next column should have the
balance it will be compared to. When you make sure that the total of the both columns is equal, then the account is completely reconciled.
With balance sheet reconciliations, it is important to compare the trial balances of both payables and receivables with the respective aging schedule balances. Once they are equal, you are free to then reconcile the next account. Always compare the aging balances and trial schedules initially.
General Ledger Review
In situations where the trial balance is more than the balance of the aging schedule, it is most likely caused by entries placed directly to the general ledger instead of the sub-ledger. It is important to analyze any of these entries and then relocate them to the sub-ledger. The amount of the difference should help you with your balance sheet reconciliation.