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What is Reconciliation

  • Reconciliation is an accounting process that uses two sets of records to ensure figures are correct and in agreement. It confirms whether the money leaving an account matches the amount that’s been spent, and making sure the two are balanced at the end of the recording period. The purpose of reconciliation is to provide consistency and accuracy infinancial accounts.
  • Reconciliation is particularly useful for explaining the difference between two financial records or account balances. Some differences may be acceptable due to the timing of payments and deposits. Unexplained or mysterious discrepancies may be signs of theft orcooking the books.
  • There is no standard method of accounting reconciliation, butGenerally Accepted Accounting Principles (GAAP) consider double-entry accounting and account conversion to be the main procedures. Businesses and individuals may reconcile their records daily, monthly or annually using either of these methods.