Reconciliation of Balance Sheet Accounts
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Reconciliation is the process of comparing information that exists in two systems or locations, analyzing differences and making corrections so that the information is accurate, complete and consistent in both locations. Balance sheet accounts must be reconciled on a periodic and timely basis to verify that all items were correctly posted to the account. All funds within the balance sheet account must be included in the reconciliation unless previous arrangements have been made. Without performing reconciliations, inaccurate recording of transactions may occur that would result in incorrect reporting and could impact resources.
The Office of the Controller will maintain a master list of balance sheet account assignments. This list will show the unit and person responsible for completing individual account analysis on a monthly basis, where the supporting files (system and documents) are located and the period through which accounts have been reviewed. As new accounts are set up, the Office of the Controller will assign an individual to complete the related periodic analysis.
- Preparing Required Documentation
- Completing the Analysis
- Reviewing the Analysis
- Retaining Documentation
Preparing Required Documentation
Prepare a separate work paper for each balance sheet account to document the reconciliation. The work paper must contain the following information:
- The balance sheet account number and account name.
- A statement of purpose for the account.
- A brief description of the debit/credit activity that normally processes through the account.
- The accounting period for which the analysis is being completed.
- Key as to the presentation in the account (e.g., is credit shown as a positive or negative number).
- Activity for the period - presentation will be determined based on the nature of the account and the volume of activity that is recorded monthly in that account.
- Substantiation of the account's ending balance through review of underlying supporting documentation.
- The name and phone number of individual preparing the reconciliation.
- The date the reconciliation was completed.
- A list of contact names and phone numbers/email addresses for questions relating to the account.
- Keep account information updated for changes in processing and other information.
Completing the Analysis
Perform the following activities after each month end close:
- Confirm the opening balance with previous work papers, or that balance was zero if this is a new account.
- Review the activity posted to the account to ensure that detail items are:
- Properly classified to the account,
- Authorized in accordance with University policies, State and Federal laws and regulations, and specific sponsor or donor requirements or restrictions, and
- Within the guidelines of the stated purpose of the account.
- Ensure that all expected charges, receipts or other activity appears in the account.
- Take appropriate actions to record necessary adjustments.
- Take immediate action to resolve errors or discrepancies noted during the reconciliation process and follow up to ensure that errors are corrected.
- Maintain copies of supporting documentation for activity processed for the account.
- Confirm the ending balance per the reconciliation agrees to the general ledger balance.
Reviewing the Analysis
Submit the account analysis at the end of each quarter for review to the Office of the Controller. The reviewer verifies that:
- Analysis includes all of the funds within this balance sheet account.
- Ending balances agrees to the general ledger.
- Ending balances are substantiated with supporting documents.
- All activity is appropriate and reasonable.
- Adjustments or corrections, if necessary, have been initiated.
- The account (fund and reporting category) has been assessed for the need to retain.
Supporting documentation for detail items comprising the balance in the account should be retained until open items have cleared. Supporting documentation for items relating to period activity (Accounts Receivable records, Vendor Invoices, Cash Receipts, Journal Entries, etc.) in the account analysis should be kept in accordance with record retention guidelines.
For questions or assistance with implementing a Balance Sheet account reconciliation, contact Accounting Services at 612-625-0126.