What is the reconciliation? Need of reconciliation? What are the common reason of variances and their rectification process?

Question

Accepted Answer

Reconciliation is the process of comparing and adjusting financial records to ensure accuracy and consistency.

Reconciliation is the process of comparing two sets of records to identify and resolve any discrepancies.
It is commonly used in accounting to ensure that the balances in the company's books match the balances in the bank statements.
The need for reconciliation arises due to various reasons such as errors, omissions, timing differences, and fraud.
Common reasons for variances include bank errors, outstanding checks, deposits in transit, and unauthorized transactions.
The rectification process involves identifying the cause of the variance, making necessary adjustments, and updating the records.
For example, if a company's bank statement shows a higher balance than its books, it may be due to an outstanding deposit that hasn't been recorded.
To rectify this, the company would add the deposit to its books and reconcile the difference.
Reconciliation is crucial for accurate financial reporting, detecting errors or fraud, and maintaining the integrity of financial records.

Accepted Answer

Reconciliation helps us for the settlement of accounts payable and receivable from vendors so that we can nil the accounts at the end of the financial year.

What is the reconciliation? Need of reconciliation? What are the common reason of variances and their rectification process?

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