Understanding Accounts Reconciliation
Accounts reconciliation is the process of confirming whether the balance in your checkbook is in tune with the corresponding bank statement you have. An account is a record that you keep related to your financial transactions with credit card companies, banks or retail stores. It can be considered as an agreement that takes place between the buyers and sellers where payments are made in the future. Bills of exchange, checks, and promissory notes are some of the different forms of payment. They are signed documents that can be transferred, and they guarantee to pay the bearer a specified amount at a later date.
Through account reconciliation, you can avail of suitable methods for reconciling your account to the monthly financial reports that are produced by the Financial Records System (FRS). It can help you in the evaluation of departmental account records in connection to the reports that have been generated by the Financial Records System. This enables you to verify how accurate each account statement is in a better manner. It can also help you in the identification of various inconsistencies and errors in your accounting. If you want an efficient reconciliation, then you need to be certain that the person who is in charge of an account maintains accurate and full records. You can choose whether you want to use a computer program or a manual filing system for the maintenance of the records. You can even develop a record keeping and filing system of your own, which should be capable of providing an effective means of reconciling the accounts every month. There are some files that can be used to make the process of account reconciliation easier for you. They are:
Pending files: These files contain source documents that have had some activities posted on the Financial Records System, but require further activities before being completed. These include Inter-departmental billing forms, Purchase orders, Travel expense reports, and Travel authorizations.
Open transaction files: These files consist of all the source documents that were started by you for your account, but which have not been processed as yet. Distribution of Deposit forms, Purchase orders, Check requests, Prepaid purchase orders, Merchandise orders, Interdepartmental Billing forms, and Travel authorizations are some of the kinds of source documents.
Closed transaction files: Source documents that are fully processed in the Financial Reports System are held in these files. You can refer to the Records Retention Policy to find out how long the documents need to be maintained on file.
Monthly reports: Monthly reports are received when a month ends. The accounts need to be reconciled to the monthly reports. The FBM091, Account Statement, and the FBM091 and Report of Transaction can be handed to the person who is handling each account. Once this is done the pending files can be compared with the FBM091 and the Report of Transaction. The FBM091 and the Report of Transaction has a detailed list of transactions that are posted in a month. You can make a comparison of the reports and the source documents in order to find out whether the encumbrance was established properly, or whether it was adjusted or even cancelled in the correct account and object code.
There is a lot of software available in the market that can help you in the reconciliation of your account in an automated manner. The software not only provides you with help in the account reconciliation, but they are priced quite reasonable as well.