How to Reconcile General Ledger Accounts?

What is Reconciliation in Accounting? How to Reconcile an Account?

What is reconciliation in accounting? How to reconcile an account? Reconciliation in accounting stands for the comparison between two different financial accounts in order to see if they have the correct account balances between them for the end of an accounting period. The accountants responsible for the reconciliation process must compare the balance amount of the general ledger accounts with various other independent systems in order to verify the accuracy of the reports. In case of discrepancies, the accountants must identify these errors and bring the balances of the two identified records into agreement. Under Section 404 of the Sarbanes-Oxley Act of 2002, it is compulsory for all publicly-traded institutions to have internal controls for financial reporting as part of the annual report. Further, they must maintain these controls for total effectiveness.

The financial institutions are therefore supposed to follow the process of reconciliation in accounting, where all the balance sheets that contain any errors for rework can be adjusted prior to the end of the accounting period. In order to ensure complete accuracy in their financial reports, most institutes are often unable to produce the general ledger in time. This, in turn, brings the possibility of risk to the organization for non-compliance. The process of reconciliation in accounting should ideally be accomplished before any requirement of verification by the Financial Institution (FI) on the integrity of their financial reports.

To summarize, the process of reconciliation in accounting is a method to identify, adjust, and balance out the remaining amounts of two different financial accounts in case there are any discrepancies. The above procedure will help to correct the balance in the account and validate the institution’s financial accounts and financial information. The account reconciliation will typically be processed or carried out after the close of a financial period. So, during this time, the accountant will manually go through each general ledger, comparing the balance amount with other sources and using their financial data. This will help the accountants to verify whether the balance amount on all the general ledger accounts is correct. In case the balance amounts are inaccurate, the accountants will investigate them further and correct the remaining errors. Finally, once all the general ledger accounts are verified, the financial information will be stored for audit use and sent for the audit report.

Meaning of Reconciling General Ledger Accounts

Meaning of reconciling general ledger accounts: A general ledger is the financial recordings of every transaction made by numerous bank accounts in a financial institution. The general ledger balance sheet reconciliation requires deducting the total number of debits from the total number of credits, to ensure that the balance amount in all of the accounts is accurate. For a financial institution, the quality of their financial data is recorded at the general ledger level, which is why it should be reconciled at regular intervals, such as monthly or quarterly. Reconciling of the general ledger accounts is essential for reporting and maintaining internal controls – without which the institute could face systematic issues. Thus, reconciling general ledger accounts is at the centre of all functions held by accountants, and the absence of it can result in incorrect records or inaccurate financial data, which in turn will impact the audit reports and the financial resources of the financial institution.

How to Reconcile General Ledger Accounts?

How to reconcile general ledger accounts? The process of reconciliation aims to correlate between two sets of records and maintain an inventory that can help to identify the account’s transactions, detect any errors in their balance amounts, and correct the amounts in case of any discrepancies. The general ledger account is a summation of all transactions in subsidiary ledger accounts, which includes the accounts payable and receivable, inventory, and cash amounts.

How to reconcile general ledger accounts? The method used for general ledgers is a double-entry accounting method, where the income is categorized under debit, credit, and the cash amount. The items that enter the general ledger can be divided into different categories: first, the journal entry that reflects the item number for all account transactions; second, the description of the transaction; third, the value of the account’s net balance as credit or debit, and, lastly, the remaining balance in the general ledger.

The daily journals – which are records, apart from the general ledger – are used to keep track of all transactions taking place on a daily basis, such as any cash amounts for an invoice. These transactions are then posted in the general ledger, where the totals of their invoice amount are calculated and added to the financial reports/balance sheet. The balance sheet is important because it shows the financial institution’s total revenue and expenses, along with the income statement, which is closed at the end of the accounting year. The balance sheet also helps to keep a record of the institution’s financial health.

How to reconcile general ledger accounts? The procedure for general ledger begins by logging in or keeping a journal of every business transaction with the transaction details. These transactions are then categorized into different accounts: cash, accounts payable, or sales. Then, these daily journals are reconciled regularly (at the end of every month or quarterly) and transferred into the general ledger once they are complete. There are different ways to investigate and review the reconciliation process when they are categorized in different accounts: investigating the beginning balance to the ending reconciliation; investigating accounts in the current period; reviewing the adjusting journal entries; reviewing when journal entries are reversed; and reviewing ending details with the ending balance.

Importance of GL Accounts Reconciliation

The process of GL accounts reconciliation is followed by financial institutions before the annual audit, to ensure that the accounts are accurately recorded. The GL accounts reconciliation makes sure that those financial accounts are correct and efficient, making the closing processes easier and financial regulations simpler to comply with. There are added benefits of GL accounts reconciliation, including precision, accuracy, and consistency in the institution’s financial data/statements, all of which better aid business-related decisions. The accountant team’s work is to use reconciliation to prevent any errors in the balance sheets or various accounts in the ledger within the timeline. The financial institution receives a blueprint of their financial spending, which allows better clarity on the allocation of finances and overall improved financial health. The general ledgers should be reconciled regularly every month, which will help to review and maintain the institution’s internal controls as per the Sarbanes-Oxley Act, and further prevent any fraudulent activities from taking place in the financial institution.

Read More: About the Financial Action Task Force (FATF) organization.
Read More: What is the role of a Money Laundering Reporting Officer (MLRO)?
Read More: Which countries are stated in the FATF Countries List?

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Being estimated at between US$800 billion to US$2 trillion every year, money laundering is a serious problem for the global economy. While regulators and financial institutions are working hard to pre...

Is AML Compliance Heading for a New Normal in the Age of Digital Payments?

Increased digitization has influenced various businesses and brought in a paradigm shift in the way they create business models and approach growth opportunities. Moving away from conventional transac...

Excel to AI: How Reconciliation Tools Evolve for Better

In the world of finance, reconciliation is the process of comparing two related sets of records or two accounts at the end of a specific accounting period to find out if account balances are matching ...

Lessons Not Well Learned: 2020 AML Fines Cross 2019 Total

If research is to be believed, institutions across the globe have not done enough in the anti-money laundering (AML) compliance area. Data from consultancy Duff & Phelps revealed that AML fines in...

Exploring AML Risks in COVID-Era and the Ways to Address Them

The world continues to battle the COVID-19 pandemic and the crisis it brought in is unprecedented in the history of humankind. While there are a number of pandemic-related factors contributing to the ...

AML Amid COVID-19: Watch out for These FBI-listed Fraud Schemes

There has been a rise in the number of cybercrimes and fraud schemes across the globe ever since the proliferation of the COVID-19 pandemic. Criminals, in general, are taking advantage of people’s s...

OCC Spring Risk Perspective: 5 Takeaways on Compliance Risk

Despite its general strength, the US federal banking system is apparently susceptible to the ongoing economic weakness caused by the rampant spread of coronavirus. Earlier this month, The US Office of...

How Criminals Used COVID-19 Sales Pitch to Defraud, Launder Money

As the world is working hard to contain the spread of the COVID-19, criminals continue to take advantage of the pandemic. They are devising sophisticated methods to defraud people and launder the crim...

5 Top Myths and Facts about AI Implementation in AML Programs

We are more confirmed about the power of Artificial Intelligence (AI) to transform lives and businesses now. There are countless possible applications of AI and machine learning at present, and we see...

Typology Repository Management: Solving AML Problems Via Collective Intelligence and Continuous Learning

Despite its general strength, the US federal banking system is apparently susceptible to the ongoing economic weakness caused by the rampant spread of coronavirus. Earlier this month, The US Office of...

Money Laundering Amid COVID-19: What Regulators Across Globe Say

As the world continues to fight against the COVID-19 pandemic, there are reports that criminals are taking advantage of the difficult situation. They are seizing the moment to proliferate their crimin...

How will Art Cease to Be a Preferred Money Laundering Vehicle?

Money laundering via high-end art and antiquities is not new yet it is difficult to detect. Art-related money laundering amounts to about US$3 billion per year, according to this blog, quoting the Uni...

Beware! Money Mules in Demand amid COVID-19. Here’s an Effective Cure

If reports are to be believed, cybercrooks are taking advantage of the COVID-19 situation. They are targeting people who were laid off or working from home due to the pandemic to work for them as mone...

How do we weather a tornado of change?

“Great works are performed not by strength but by perseverance” – Samuel Johnson All of us are in challenging times. However, we cannot afford to be lethargic to life, work, and busi...

Roundtable Rewind: Embracing Next-gen Tech & Collaboration Key to Sustainability

As a regtech player with a vision to enable sustainable compliance programs in financial institutions, Tookitaki organized a first-of-its-kind industry roundtable in Charlotte, NC, USA to discuss oppo...

Tookitaki Appoints Industry Veteran Joe Friscia as Advisor

Tookitaki Holding Pte. Ltd. appointed industry veteran Joe Friscia, former President of NICE Actimize and BAE Systems as Advisor to the Company’s Advisory Board. Joe brings over 25 years’ extensi...

Should Modern Machines Be Ethical?

There are mounting concerns across the globe about the reliability and safety of artificial intelligence (AI) based systems and its enabling technologies such as machine learning (ML). On the air are ...

Tookitaki Raises Another US$11.7 million in Series A; Closes Round at US$19.2 million

– by Abhishek Chatterjee, Founder & CEO The Tookitaki team and I are excited to announce that we have raised an additional US$11.7 million in Series A funding, taking the total investment in...

30 Years of FATF: Notable Facts About Global AML Watchdog

The Financial Action Task Force (FATF), the intergovernmental body formed in 1989 to combating money laundering, is celebrating its 30th anniversary this year. Since its inception, the global agency p...

Tookitaki Joins Aite Financial Crime Forum as Sponsor

Technological advances have fundamentally changed the operational landscape of financial institutions. However, there are also new risks emerging in forms of sophisticated financial frauds and complex...

Will Machine Learning Replace Compliance Professionals?

The impact of modern technologies such as artificial intelligence (AI) and machine learning on job security has been a widely discussed topic today. Of course, AI has advanced very quickly in the last...

6 Most Prevalent Cyber-Laundering Methods in APAC

Despite being a medium to exchange information in real-time and with scale, the Internet is being misused in several ways. Among the slew of financial crimes facilitated by the Internet, money launder...

What Made Us Earn the WEF Technology Pioneer Title

Tookitaki has bagged another global acknowledgement for its outstanding works in the regulatory compliance field. Our company was selected among hundreds of candidates as one of the World Economic Fo...

We Stay as a Team, We Win as a Team and We Flourish as a Team

“Teamwork is the ability to work together toward a common vision. The ability to direct individual accomplishments toward organizational objectives. It is the fuel that allows common people to a...

ABA Regulatory Compliance Conference: 10 Sessions You Can’t Miss

The 2019 edition of the American Bankers Association (ABA) Regulatory Compliance Conference is a few more days away. Organized by the Washington, D.C.-based trade association, the conference is touted...

Tookitaki AMLS Wins SBR Technology Excellence Award 2019

Tookitaki’s Anti-Money Laundering Suite (AMLS), an end-to-end machine learning-powered transaction monitoring and names screening solution, has bagged the inaugural Singapore Business Review Tec...

Watchdogs Grow Optimistic about AI Prospects at Banks

Proper regulation of banking operations is important as any failure in the banking system would affect the wider economy. Therefore, banking is one of the most regulated industries across the globe. F...

Pitfall of Black Box AI at Banks: Explaining Your Models to Regulators

The use cases of artificial intelligence (AI) and machine learning in front-office, middle-office and back-office activities at banks are growing slowly but steadily. The major areas of AI play includ...

AI for Regulatory Compliance at Banks: 4 Assessments Before You Okay the Solution Proposal

Banking is one of the industries where artificial intelligence and machine learning find their applications at a rapid pace. Regulatory compliance within banking is an area which has become a costly a...

We Believe in Innovation, the Key to Survival and Growth

“Innovation distinguishes between a leader and a follower.” -Steve Jobs What comes on the top of your screen when you google the meaning of the word innovation is – the introduction of somet...

Compliance Functions in Need of a Technological Overhaul. Can Machine Learning be the Game-Changer?

McKinsey in its latest compliance benchmarking survey found that compliance function at financial institutions has reached “an inflection point” and current compliance standards are in an “incho...

Tookitaki Raises US$7.5 mn Series A from Global VCs to Transform Regulatory Compliance

Tookitaki, a regulatory technology company that aims to enable financial institutions to develop sustainable compliance programs, has raised US$7.5 million in Series A round. The round was co-led by L...

From Wachovia to Danske Bank: Biggest Money Laundering Cases in Recent Times

Money laundering – the criminal activity of processing criminal proceeds to disguise their origin – is one of the gravest problems faced by the global economy, and its size is growing rapidly. It ...

A Modern Approach to Address the Reconciliation Challenges of Financial Services

Reconciliation of transactions is deemed critical for the smooth running of every financial institution. The speed and accuracy of data reconciliation can distinguish a successful institution from its...

Busting a Myth: Compliance Officer’s Job is All About Risk

Regulatory compliance has become a dreadful task for banks after regulators across the globe set stricter norms in the aftermath of the 2008 financial crisis in an effort to prevent financial crimes s...

SocGen Goes Next-Gen with Tookitaki Reconciliation Suite

Société Générale leveraged Tookitaki’s Reconciliation Suite to automate the bank’s existing break reconciliation system. Key Challenges Addressed The bank’s finance department was unable to ...

Attending ACAMS Conference in Singapore? Tookitaki Awaits You with Its Disruptive AML Solution

“In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it.”- Jeff Bezos Singapore is hosting ACAMS’...

MAS’ Stress on Transaction Monitoring for Effective AML/CFT Compliance and Machine Learning is the Answer

Singapore is known for its top-notch AML/CFT regime created through up-to-date legislation, stringent policy and uncompromising supervision to safeguard against the abuse of the city state’s financi...

Mifid II and the Pressing Need for a New Reconciliation Approach

The financial services industry in the EU has been confused with the introduction of a revamped version of the Markets in Financial Instruments Directive (Mifid II). The ambitious regulatory reforms t...

Is Automated Reconciliation Next to Impossible in Today’s Complex Financial World?

The 2008 global financial crisis and fairly new regulatory requirements like Basel III asked financial institutions (FIs) to cut operating costs and adopt a lean operations structure, pushing FIs to r...

Modern Tech to Reshape US AML Compliance with Regulators’ Recent Handshake

George Bernard Shaw once said: “Those who cannot change their minds cannot change anything.” The past week has seen a significant change of mind from financial regulators in the US in their ardent...

Skills Development: We Have Talents and We Strive to Multiply Them

“Mastery lies on an infinite continuum, and as a result, we will never reach the end. We can, however, see to it that we are as far along that continuum as our circumstance allows.” ― Chris Mat...

It’s Our Fourth Founding Day; Taking a Pause to Cherish Our Simple but Awesome Journey

Today, as we step into our 4th year of foundation, I feel proud and honored to be leading Tookitaki that has been successful in creating added value to all its stakeholders. I was never a CEO and Took...

Tookitaki Expands into the US with New Office in Charlotte

SINGAPORE, Sept. 24, 2018: Tookitaki Holding Pte Ltd, a leading regulatory technology company, is pleased to announce the official opening of its North American office in Charlotte, NC, in the Unite...

We Tame Machines but We Unleash Human Spirits

We are well aware of the fact that our progress as an organization is in the hands of our employees. The more energy, time and attention we invest in them, the more yield we receive. So, we always mak...

5 Methods That Modern Money Launderers Use To Beat Detection

Society prepares the crime, the criminal commits it. DID YOU KNOW? Every year, an estimated amount in the range of US$800 billion-US$2 trillion (2-5% of global GDP) is being laundered globally Regulat...

Risk Management Conference: Positive Vibes from All Corners

The Risk Management Association’s (RMA) premier annual event, the Risk Management Conference, came to an end on 6 November, and Tookitaki had the privilege to attend the event which we believe was ...

Singapore Fintech Festival: Tookitaki to showcase advanced machine learning solutions in financial services

Singapore is assured of the Fintech world’s unwavering attention next week, as the city state, is hosting this year’s Fintech Festival during 12-16 November. Touted as the world’s largest platfo...

The RMA Clarion Call to Address Risks and the Tookitaki Way

Risk officers, doing your best today is good while preparing hard for tomorrow is extraordinary. Risk management at banks has become difficult due to operational and regulatory changes. The Risk Manag...