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What is meant by reconciling an account?

Author:
Harold Averkamp, CPA, MBA

Definition of Reconciling an Account

Reconciling an account is likely to mean proving or documenting that an account balance is correct.

Examples of Reconciling an Account

When a company reconciles its bank statement, it is reconciling the balance in its general ledger account Cash (or Cash: Checking Account) with the bank’s information.

Prior to issuing a company’s financial statements, it is wise to reconcile every balance sheet account by collecting the information that supports the accounts’ ending balances. For example, the Accounts Receivable balance could begin by comparing the balance with an aging of the accounts receivable.

Another example is reconciling the balance in the general ledger account Utilities Payable. This might be accomplished by computing the daily cost of each utility that the company uses. The cost per day is then multiplied by the number of days since the last meter reading date shown on the utility bills that have already been recorded.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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