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3 Reasons General Ledger Reconciliation Is Important

Author : Dennis Najjar
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General ledger reconciliation is one of the key procedures to maintain timely and accurate bookkeeping for businesses. A reconciled general ledger, completed according to GAAP principles of accounting, is the cornerstone to understanding your company’s financial status, spotting incidences of theft, and pinpointing inaccuracies in your records.

What is General Ledger Reconciliation? 

The general ledger is the complete record of every financial transaction your company undertakes. When we say we’re “balancing the books,” the general ledger is what we’re referring to. The important thing to remember is that each transaction must have an equal and opposite transaction. This means each transaction is recorded once as a debit and once as a credit.

Other financial statements—including cash flow statements, revenue sheets and expense reports—are also important, but the general ledger is the comprehensive statement of all your company’s financial activity.

General Ledger Reconciliation Using GAAP Principles
When your bookkeeper reconciles your general ledger, she works side-by-side with your financial controller to make sure that all the credits and debits are recorded in the correct places and that nothing seems out of place or unusual.

General ledger reconciliation, completed by a bookkeeper and financial controller,accomplishes many things: 
 

  • Provides a basis to check all other financial statements for accuracy
  • Offers a complete, accurate record of your company’s financial activity
  • Helps you spot theft within 30 days of its occurrence, hopefully while the losses are still small and manageable
  • Helps you spot runaway spending so you can make adjustments and improve your company’s financial health
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