General ledger reconciliation

General ledger reconciliation is the process of identifying and rectifying errors in recording business transactions and ensuring the accuracy of ledger account balances. General ledger is the journal or place where journal entries related to all the business transactions are recorded. Thousands of transactions are recorded in an accounting period and it is natural that some errors can be made in recording these transactions.

For this reason, this reconciliation process is performed by accountants at the end of an accounting period before preparation of financial statements. In this process, general ledger account balances are compared with source documents, independent statements such as bank statements, vendors and customers statement of accounts and any other comparable reports to ensure that account balances are correct.

During the process of general ledger reconciliation, if any differences are observed, these differences are investigated to identify any possible errors in recording transactions. Errors identified are rectified by the accountants by passing adjusting entries so that accurate amounts are reported in the financial statements.