Importance of reconciling the books of accounts

Reconciling the Ledgers of the books of accounts is a critical control exercise which helps in ensuring the financial wellness of any organization.

It should become one of the core routine activities of the Account’s Department concentrating on the efficient results and the accuracy. It also helps in accessing the nature and the causes of the variances. Though it is a tedious process, if done periodically, it results in an accurate and efficient reporting.

The main purpose of the Ledger accounts reconciliation is for few of the following reasons:

1) To identify the ledger accounts that doesn’t match

2) Wrong posting of entries (i.e., to other ledger heads)

3) Double Entries

Pass adjustment entries for the correction to ensure that the books of accounts are reconciled at the end of financial closing.

Most importantly the accurate financial information should be provided to the management as a basis for their business economic decision making.

We should consider the reconciliation process as a good housekeeping as it identifies errors and omissions in the accounting process, including invalid journal entries and double entries, so that it can be corrected. This process helps in detecting frauds and serves as a major tool for audit process.

This reconciliation process not only assists you in keeping your accounts reconciled but also provides accurate financial information for a better decision making.

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