What is Reconciliation?

Using two sets of accounting records in order to ensure that the financial figures are correct and match is called reconciliation. This is a great method of confirming that the all the money that is spent by the business is recorded properly and accurately.

Reconciliation may be used to explain the differences in recorded financial information or account balances. Some differences could be acceptable; they could be explained by the difference of timing in recorded balances and deposits. Unexplained financial inconsistencies may be caused by illegal activity such as theft or cooking the books.

It's in the best interest of any business to reconcile their accounting books. This can help avoid balance sheet errors, check for illegal activity, and minimize the chances of incurring penalties from auditors.