#034 The deduction of expenses related to events for your employees.

The monthly accounting reconciliation consists of comparing the company's accounting operations to its banking transactions and the movements in the values ​​of certain liabilities or accrued expenses. In other words, each accounting transaction must correspond to a cash movement (bank card, credit card, etc.) or to accrued expenses.

There are different types of accounting reconciliation.

Balance sheet reconciliation

This involves reconciling (or reconciling) a balance sheet account i.e. ensuring that you have correctly recorded, accounted for every transaction in your business and applied the appropriate classification in the process; and that everything balances with your various readings.

The balance sheet is composed

• assets such as cash, receivables, inventories, prepaid expenses and fixed assets;
• of liabilities which include amounts owed to the seller, customer, employee, debtor and others.

In a future blog, we will provide you with a more exhaustive list. On the other hand, here is a brief overview of the various connections.

Cash reconciliation

The bank balance should match what is currently in your accounting application, for example QuickBooks Online® . With your checks cleared in the bank account and checks/transactions pending.

This operation can be complicated. This is why we recommend calling on a professional or an accountant. Indeed, if the balance of your accounts does not balance, it will be difficult to begin the accounting reconciliation of the balance sheet and your balance sheet will not be compliant.

It is important to know that for any unsupported transactions older than 45 days, you will need to provide an explanation as to why they have not yet been authorized with the bank. This is particularly the case for checks in circulation or expired transactions.

Reconciliation of accounts receivable

Another type of accounting reconciliation: accounts receivable reconciliation. The purpose of reconciling accounts receivable (your accounts receivable among others) is very important, because it determines how much money you need to collect from your customers and when.

You must always ensure that:

• Accounts receivable data is accurate.

• The status of your accounts receivable, for example, whether they need to be tracked or written off.

• No item in the account is more than 90 days past due. Otherwise it will be necessary to find the explanation for this state and why the customer account has not yet been paid.

• Inventory reconciliation (your stocks, including your items in stock)

It's a very good habit to check the value of your stocks and, especially, the items you have on hand. An inventory (action of physically counting your inventory items) must be carried out at the end of a predetermined period. In general this period is either quarterly or annually. A good time to carry out an accounting reconciliation.

If you use perpetual inventory with QuickBooks Online, be aware that the method used to calculate your inventory is the FIFO (first in, first out) method.

When you do a physical count of your inventory, it must correspond to the book balance. If there is a discrepancy between the two then a stock adjustment in your financial application will be necessary. Among other things, it is important to identify the reason for this discrepancy. This could be due to theft, fraud or abuse through this process. Note that a banker is often interested in the exact value of your inventory . This allows him to advance certain amounts on the line of credit.

Individuals in business; may also use their account reconciliation to verify the accuracy of their checking or credit card accounts or the value of their assets and liabilities.

In a future blog, we will present the main positions to be reconciled in more detail. These are not only cash items, but also debt items and others.